2021
Annual Report
STRATEGIC REPORT
Energean plc
www.energean.com
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STRATEGIC REPORT
Key Metrics Highlights
Average working interest 2P reserves
and 2C resources (MMboe)
Average working interest production (Kboe/d)
Sales revenue ($ million)
Cost of production ($/boe)
Adjusted EBITDAX ($ million)4
Profit/(loss) after tax ($ million)
Cash flow from operating activities ($ million)
Net debt / (cash) ($ million)5
2021
1,154
41.0
497
17.5
212
(96)
133
2,017
Pro forma 20201
20202
1,1403
48.3
336
11.3
108
(416)
137
1,240
920
3.6
28
21.4
(8)
(93)
2
1,240
1 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.
2 Actual results consolidate from the closing date of the Edison E&P transaction, which occurred on 17 December 2020.
3 Reserves are pro forma (include Edison) plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“EISL”). The
transaction closed on 25 February 2021.
4 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’.
5 Net debt/(cash) is shown on an actual basis i.e. not pro forma.
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STRATEGIC REPORT
Report Highlights
A record year, both financially and operationally
2021 average working interest production was approximately 41.0 Kboe/d (72% gas), above initial
expectations and at the mid-point of the revised full year guidance range of 40.0 - 42.0 Kboe/d. Coupled
with the all-time-high gas prices experienced in Italy, Energean generated a 48%6 year-on-year increase in
full year revenues to $497.0 million and a 96%6 increase in EBITDAX to $212.1 million. We enhanced our
position in Israel through the acquisition of Kerogen Capital’s 30% holding in Energean Israel Limited
(“EISL”)7, adding 219 MMboe for a total consideration of less than $2/boe.
Emerging from capital investment to sustainable cash-flow generation
Despite the challenges imposed by COVID-19 during 2021, Energean’s flagship Karish development was
92.5% complete at end-December 2021 and at the time of writing is gearing up for imminent sail-away
from Singapore with first gas on track for Q3 2022. In 2021, the Group also took Final Investment Decision
(“FID”) on Karish North (Israel), Second Oil Train and Gas Riser (Israel) and NEA/NI (Egypt). These
projects, combined with Karish and Tanin, Epsilon (Greece) and Cassiopea (Italy), will lead to the
commercialisation of a combined 824 million barrels of oil equivalent (“MMboe”) of 2P reserves (82%
gas). This positions Energean to achieve its medium-term targets to deliver working interest production
of more than 200 Kboe/d, which we expect to translate into annualised adjusted EBITDAX of more than
$1.4 billion per year.
2022 marks the year where we emerge from heavyweight project investment and transition to a material
cashflow generating company underpinned by long-term fixed price gas contracts.
Setting the foundations for the future via solid capital structure
In 2021, we raised over $3 billion from the debt capital markets to refinance existing borrowings and
increase liquidity. This included: (i) $2.5 billion senior secured notes, non-recourse to the Group, at the
100% subsidiary Energean Israel, (ii) €100 million Greek state backed loan, non-recourse to the Group, at
Energean Greece and (iii) $450 million senior secured notes at Energean plc. In doing so, we extended
our weighted average maturity to approximately six years, pushed out commencement of major debt
repayment obligations to 2024 and converted floating interest rates to fixed rates.
We ended the year with over $1 billion of liquidity8, ensuring we are fully funded to deliver our projects,
removing any near-term debt repayment obligations and eliminating exposure to interest rate volatility.
Taking meaningful actions towards net-zero
Energean is focused on reducing its carbon emissions and is working towards its 2050 net-zero target.
In 2021, we delivered a 8% year-on-year reduction in carbon emissions intensity to 18.3 kgCO2e/boe,
when considering 2021 consolidated data versus 2020 pro forma performance data on an equity share
basis. Actions taken in 2021 to achieve this reduction includes implementing a zero flaring policy across
its operated sites and switching to renewable-sourced electricity in Italy — green electricity contracts
were put in place for Israel and Greece in 2020.
Energean is also proud to have published its first Climate Change Policy, which defines the Group's
actions to deliver upon its commitment to become a net-zero emitter by 2050. Within this, part of our
short-term target is to advance our carbon capture storage (“CCS”) projects — we achieved this in 2021
by entering pre-FEED at our Prinos CCS project in Greece.
Finally, the Carbon Disclosure Project (CDP) upgraded its Climate Change and Supplier Engagement
rating for Energean to B and A- respectively (up from B- and B from the previous year. This compares to
a sector average of C for Climate Change and C for Supplier Engagement.
6 Versus 2020 Pro Forma.
7 The transaction closed on 25 February 2021.
8
Including restricted cash amounts of $200 million and undrawn Greek debt facility of €100 million.
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STRATEGIC REPORT
Non-Financial Information Statement
The following table constitutes our Group Non-Financial Information Statement in compliance with
Sections 414CA and 414CB of the Companies Act 2006. The information listed is incorporated by cross-
reference. Additional Group Non-Financial
is also available on our website
www.energean.com.
Information
Reporting
Requirement
Group Approach and Policies
Relevant Information
Relevant
Pages
Environment
Environmental Policy
Environmental policies
65
Climate Change Policy
Zero-Routine-Flaring Policy
Task Force on Climate
Related Disclosure
Environmental targets
20-22
Environmental data
65-66, 69-71
Environmental KPIs
38-39
TCFD disclosure
20-29, 31-32,
38-39, 69-71,
81-82, 98-
100, 115-
116, 127-128
Employees
CSR Policy
HSE policies
61-62
Equal Opportunities Policy
Code Of Conduct
Corporate Major Accident
Prevention Policy
Human Rights
Code of Conduct
HSE KPIs
HSE data
Excellence through
our people
CSR approach
Excellence through our
people
39
64
51, 56-57
50-51
56-57
Social Matters
CSR Policy
CSR approach
50-55
Code of Conduct
UN’s 17 Sustainable
Development Goals
Anti-Corruption &
Anti-Bribery
Code of Conduct
UK Bribery Act
Applicable Local Anti-Bribery Laws
Whistleblowing Policy
CSR approach
50-51
Corporate governance
111-121
Governance and
Risk Management
Corporate Governance Code
Risk management
79-103
Principal Risks and Uncertainties
Governance & Risk Management
Business Model
Our Business Model
Strategy
Our Strategy
Non-Financial Key
Performance
Indicators
Key Performance Indicators
Corporate governance
111-121
Audit &
Risk Committee
N/A
N/A
N/A
122-126
18-19
20-30
36-40
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STRATEGIC REPORT
Contents
Key Metrics Highlights ................................................................................................................................................ 2
Report Highlights ......................................................................................................................................................... 3
Non-Financial Information Statement ..................................................................................................................... 4
Contents ........................................................................................................................................................................ 5
Strategic Review
About Us ........................................................................................................................................................................ 7
Performance in 2021 .................................................................................................................................................. 9
Chairman’s Statement .............................................................................................................................................. 12
Chief Executive’s Review .......................................................................................................................................... 15
Our Business Model .................................................................................................................................................. 18
Our Strategy ................................................................................................................................................................ 20
TCFD Scenario Analysis ........................................................................................................................................... 31
Market Overview ........................................................................................................................................................ 34
Our Key Performance Indicators ............................................................................................................................ 36
Review of Operations ................................................................................................................................................ 41
Corporate Social Responsibility .............................................................................................................................. 50
Financial Review ........................................................................................................................................................ 72
Risk Management ..................................................................................................................................................... 79
Viability Statement ................................................................................................................................................. 104
Corporate Governance
Board of Directors .................................................................................................................................................. 106
Statement of Compliance ..................................................................................................................................... 111
Section 172 (1) Companies Act 2006 Statement ............................................................................................. 118
Audit & Risk Committee Report ........................................................................................................................... 122
Environment, Sustainability and Social Responsibility Committee ............................................................... 127
Nomination & Governance Committee .............................................................................................................. 129
Remuneration Report............................................................................................................................................. 133
Remuneration Policy .............................................................................................................................................. 137
Annual Report on Remuneration ......................................................................................................................... 141
Group Directors’ Report ......................................................................................................................................... 160
Statement of Directors’ Responsibilities ............................................................................................................ 164
Financial Statements
Independent Auditor’s Report to the Members of Energean plc ................................................................... 166
Group Income Statement...................................................................................................................................... 178
Group Statement of Comprehensive Income ................................................................................................... 179
Group Statement of Financial Position .............................................................................................................. 180
Group Statement of Changes in Equity .............................................................................................................. 181
Group Statement of Cash Flows ......................................................................................................................... 183
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Company Statement of Financial Position ........................................................................................................ 257
Company Statement of Changes in Equity ........................................................................................................ 258
Company Accounting Policies ............................................................................................................................. 259
Other Information
2021 Report on Payments to Governments ...................................................................................................... 267
Glossary .................................................................................................................................................................... 271
Company Information ............................................................................................................................................ 273
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STRATEGIC REPORT
Strategic Review
About Us
Energean at a glance
The leading independent, gas and ESG-focused E&P company in the Mediterranean
Established in 2007, Energean is a London Premium Listed FTSE 250 and Tel Aviv Listed TA-90 E&P
company with operations in eight 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. We
are targeting to grow production to over 200 Kboe/d and achieve our medium-term revenue and EBITDAX
targets of $2 billion and $1.4 billion, respectively. We also have a material reserve base, with
approximately 965 boe of 2P reserves.
We are also poised for further significant growth above and beyond this via a high-impact drilling
programme in Israel which commenced in March 2022. If Energean elects to drill all four exploration and
appraisal wells within this campaign, it has the potential to double the Israel gas resource base.
Our flagship project is the multi-tcf deepwater Karish project in Israel, which is approaching first gas in
Q3 2022. It will be developed via the newbuild fully-owned Energean Power FPSO, which at the time of
writing /is gearing up for sail-away from Singapore]. Energean has signed long-term contracts to supply
7.2 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 sector-leading dividend. We expect to fill the spare capacity in our 8 Bcm/yr FPSO
through spot sales to the Israel Electric Corporation and through the signing of further, long-term gas
sales agreements with domestic and / or international customers, building upon the MOU signed
with EGAS.
Energean is fully-funded for all of our planned projects. In 2021, we took steps to enhance near-term
liquidity and strengthen our balance sheet via the issuance of two new bond programmes, raising $2.5
billion and $450 million respectively, the former being the largest ever Europe, Middle East and Africa
(“EMEA”) energy-related high-yield bond.
ESG, health and safety is of central importance to Energean. We aim to run safe and reliable operations
and are committed to achieving net-zero carbon emissions by 2050 and to reducing our methane
emissions. We took meaningful steps towards this goal in 2021 when we implemented a zero flaring
policy across our operated sites and rolled out ‘Green Electricity’ in Italy (renewable-sourced electricity
applied in 2020 in Greece and Israel).
Where we operate
Energean holds a balanced portfolio of exploration, development and production assets, with operations
in eight 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 operation.
Please see pages 254-256 for a full breakdown of all our licences.
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Figure 1. Map of Energean’s operations
STRATEGIC REPORT
Figure 2. Energean Israel Limited (EISL) leases and licenses
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STRATEGIC REPORT
Performance in 2021
Record operational performance delivered record financial results
Energean continued to deliver strong performance against its strategic goals in 2021, albeit under the
weight of COVID-19. We fully integrated the acquired Edison E&P portfolio within Energean and thanks to
the focus of the technical team, delivered production beyond initial expectations from the Egypt and Italy
assets. We further managed to reduce our total EGPC receivables position in Egypt to less than $95
million from over $200 million at the time of the Edison E&P acquisition.
Karish, our flagship gas project offshore Israel was 92.5% complete at end-December 2021 and at the
time of writing is ready to sail-away from Singapore and gearing up for first gas in Q3 2022. The
completion of this project is materially de-risked, within reach and will enable us to deliver substantial
free cash flows and sustainable shareholder returns. The completion of our sanctioned and fully funded
projects will enable us to achieve our medium-term targets of over 200 Kboe/d production, $2 billion
annual revenue and $1.4 billion EBITDAX. Finally, the Israel drilling campaign provides upside beyond
these medium-term targets.
Let us take you through some of our key achievements below.
Operational highlights
• Working interest production 41.0 Kboe/d, 72% gas, above initial guidance9 of 35.0 – 40.0 Kboe/d
• 2P + 2C reserves and resources of 1,154 MMboe, a 25% year-on-year increase versus 2020 and a 1%
year-on-year increase versus 2020 pro forma10
• Karish (Israel) development 92.5% complete at 31 December 202111
• Fully integrated Edison E&P, full business solutions system implemented across the Group
• Rig contract signed with Stena Drilling Limited ("Stena") for 2022-23 growth drilling programme,
offshore Israel
• FID taken on the Karish North project (Israel) and NEA/NI (Egypt) in January 2021 and the Second Oil
Train and Gas Riser in May 2021
• EPC contract signed with KANFA AS for the second oil train in December 2021
• EPCI contract awarded to TechnipFMC for NEA/NI in February 2021 and jack-up rig contract signed
in January 2022. NEA/NI on track and 37.0% complete as of 31 December 202111
• Cassiopea (Italy) development on track and 24.2% complete at 31 December 202111
• Funding secured for the Epsilon Development in Greece
Commercial highlights
• Closed the acquisition of Kerogen’s 30% holding in Energean Israel Limited (EISL) for $380-405 million,
representing an acquisition price of $1.74 - $1.85/2P boe
Israel GSPAs
•
• MOU signed with EGAS for the sale and purchase of up to 2 Bcm/yr of natural gas on average for a
period of 10 years signifying access to export markets
• New GSA signed with A2A in Italy for Energean’s full entitlement production, commencing 1 April
2022, which contains higher pricing than the previous contract
• Hedging agreement signed for a total of 27% of expected 2022 Italian gas production locking in an
average price of € 53.30/MWh protecting our 2022 cashflow
Corporate highlights
•
•
In February 2021, issued $2.5 billion senior-secured notes, with the first tranche maturing in 2024, at
an average coupon rate of approximately 5.2%
In November 2021, issued $450 million senior-secured notes, maturing in 2027, with a fixed coupon
rate of 6.5%
9 Given in January 2021.
10 When considering Energean 2021 2P reserves versus 2020 pro forma 2P reserves (Energean (including Edison) plus the
acquisition of Kerogen’s 30% holding in EISL).
11 As measured under the TechnipFMC EPCIC.
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STRATEGIC REPORT
•
In January 2022, signed € 100 million non-recourse project funding package backed by the Greek
State, for the Epsilon development project in Greece, with an average blended interest rate of 2%
• The enhanced capital structure gives us a weighted average maturity of 6 years, pushing out debt
repayments to the medium term and eliminating exposure to floating interest rates
Financial highlights
• 2021 sales revenues of $497.0 million (48% y-o-y increase from $335.9 million)
• Operating cash flows of $133.2 million (3% y-o-y decrease from $137 million)
• Adjusted EBITDAX of $212.1 million (96% y-o-y increase from $ 107.7 million)
• Profit / Loss after tax of $(96) million (74% increase from $(416) million)
• $359.3 million capital expenditure reduction achieved versus revised full year guidance 12 of
$415-485 million
• $1,040 million liquidity at 31 December 2021
• Reduced EGPC receivables to $95 million13 at 31 December 2021 (36% y-o-y reduction from
$149 million)
Decarbonisation and ESG highlights
• 8% year-on-year reduction14 in carbon intensity to 18.3 kgCO2e/boe on an equity share basis
• Published our first Climate Change Policy and an externally assured 2020 Sustainability Report
• Entered pre-FEED for the Prinos CCS project (Greece)
• Zero-routine flaring policy in place across operated sites
• Successful roll out of ‘Green Electricity’ at our operated sites in Italy
• Methane detection campaigns in place at our Vega platform, Italy
• Achieved a B score on CDP’s Climate Change disclosure and A- on CDP’s Supplier Engagement rating
and aligned with all recommended pillars of TCFD disclosure for the second consecutive year
• Continued to implement climate-based scenario analysis and used internal carbon pricing to assist
with investment-decision making
• ESG ratings in top quartile, awarded ‘AA’ rating by MSCI, ‘Gold’ by Maala15 and ranked 29 out of 258 in
the oil and gas producers industry group by Sustainalytics.
HSE highlights
• Safe and reliable operations, zero serious injuries
• Zero oil spills and zero environmental damage.
Awards
• Awarded ‘Best ESG Energy Growth Strategy in Europe 2021’ by CFI
• For the second consecutive year, Sembcorp Marine’s Admiralty Yard was awarded a Safety and
Health Award Recognition for Projects for Safety Excellence for Energean's Karish Project.
12 Provided in the November 2021 Trading & Operations Update.
13 Net receivables shown are after provision for bad and doubtful debts.
14 Current year-on-year reduction has been calculated based on the 2020 pro forma (includes Edison) equity share emission
intensity of 19.8 KgCO2e/boe.
15 Maala is the non-profit CSR standards-setting organisation in Israel.
Page 10 of 273
Figure 3. Karish project SHARP award at the Admiralty Yard (Singapore)
STRATEGIC REPORT
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STRATEGIC REPORT
Chairman’s Statement
Karen Simon, Independent Chairman
Board Priorities for 2022
Project Delivery
Returns to Shareholders
Delivering the Energy
Transition in a Responsible
and Safe Way
Oversee Organisation’s
Transformation
Successfully deliver Karish in Q3 2022 and launch our exploration
and appraisal drilling campaign offshore Israel. Continue organic
growth projects including Karish North (Israel), NEA/NI (Egypt) and
Cassiopea (Italy).
Approve dividend policy, ensuring the right balance between
providing substantial, stable and recurring returns to shareholders
whilst maintaining reinvestment in the business at an
appropriate leverage.
Our aim is to continue to be a first-mover in the energy transition
across our sector. We will continue to track key metrics on our path
to net-zero and assess low carbon business opportunities, including
carbon sinks and carbon capture and storage projects. At the same
time, we are committed to contributing to global security of supply
in a responsible and safe way.
Oversee the cohesive transformation into a 200 Kboe/d company,
particularly in terms of infrastructure, culture and skills to ensure the
company is well prepared for this step change. Encourage the
improvement of employee awareness and engagement, on Climate
Change and the energy transition, to maximise value and deliver
upon our strategy.
Dear Shareholders,
A year ago, when I wrote my statement for the 2020 Annual Report, the world was in the midst of a new
wave of COVID-19 and tragedy and uncertainty prevailed. Indeed, the last two years will undoubtedly go
down as some of the most unprecedented and challenging years in modern history. This year, we face
new geo-political challenges. Energean will continue to be a provider to the world’s energy requirements
by supplying energy in a responsible and safe manner, in line with our gas-focused strategy.
We can learn a lot from the last couple of years. The pandemic has acutely highlighted the need to
support one another at all levels, both through family and local communities and throughout the wider
business world. I am extremely proud of the way that Energean’s teams have supported one other and
our external stakeholders throughout this difficult period, whilst maintaining the business’s strategic
focus and delivering upon our goals and targets. I truly believe that we have emerged stronger, both as
individuals and as teams, and I thank each and every one of Energean’s people and partners for their hard
work, positivity and dedication.
Social and Governance
The Board and I are keenly focused on ensuring that Energean is managed at the highest levels of
environmental, social and governance standards. ESG must be at the heart of Energean’s operations.
Strategic ESG consideration has three positive drivers: it ensures our licence to operate with external
stakeholders, it positively engages our colleagues around the world and finally, it is good for our collective
societal wellbeing.
Myself and the rest of the Board recognise that the success of the business depends on our people. 2021
was a year of significant growth for Energean and our people. With the integration of Edison E&P, we
expanded our presence into Italy, Egypt, Croatia, and the UK, and with it, welcomed more than 250
colleagues to the team. The Board is focused on ensuring that our culture is aligned with our purpose
and values, that they support and promote our diverse workforce and that we are prepared for
the step-change.
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STRATEGIC REPORT
We aim to maintain a positive, open and collaborative work environment to equip our people from all
backgrounds to fulfil their potential. In 2021, we developed upon existing initiatives focusing on employee
health, engagement and training. We provided support through professional training opportunities and
education, charity, sport and environmental protection, which you can find more detail on in the CSR
section of this Annual Report.
HSE
The safety of our people will always remain the Board’s number one priority. Safety at Energean is
underpinned by our well-structured and continuously improving HSE Management system. I’m pleased
to report we ended the year with zero serious injuries.
In 2021, we have continued to oversee the reduction of our GHG emissions, progress low-carbon
business solutions to help different countries decarbonise and align with TCFD and CDP
recommendations. We have also incorporated carbon pricing into our investment decision-making
process, ensuring that our business is transparent and robust against different climate change scenarios.
The pandemic also acted as a catalyst for driving advancements across a number of sectors. Energean
has been developing its own innovations; our Eco-Hydrogean concept is a unique and integrated solution
that will combine hydrogen generation and carbon capture and storage more efficiently and sustainably
than an average blue hydrogen project. The process is designed to achieve negative CO2 emissions and
facilitates the development of hydrogen-based industries and transportation with external partners, such
as ammonia, fertiliser and agriculture industries.
In 2021, the Nomination and ESG Committee was split in two, which created the Environment, Safety and
Social Responsibility Committee. This is chaired by Robert Peck (independent non-executive director)
and is attended by myself, the CEO and the HSE Director, the latter who conducts the operational
management of any and all climate change issues. The purpose of the committee is to evaluate
Energean’s policies and systems for identifying and managing ESG and HSE risks, which includes the
identification of risks, such as climate change risks, and propose mitigation measures. The Committee
convenes every quarter and reviews the Board papers on Energean’s carbon emissions performance
and KPIs.
As well as our long-term pledge to the environment, we are also committed to ensuring that we have
strong relationships with our partners, the supply chain, and the people and governments in countries in
which we operate. The Board and I were pleased to see that the CDP increased Energean’s Supplier
Engagement Rating in 2021 to A- from B in 2020.
Board composition
During 2021, I was delighted to welcome Roy Franklin to the Board. His extensive experience in CEO, NED
and Chair roles has brought significant value to our boardroom discussions. I look forward to working
with Roy and the team to deliver our strategy. In July, we also held one of our 2021 Board of Directors
meetings in person in Energean’s Athens office. This provided myself and the rest of the board with an
excellent opportunity to improve our employee engagement – an area we believe is critical for
strong governance
Operational delivery
Last year, I wrote that the Board’s priorities for the year were to successfully deliver Karish and progress
our growth projects and exploration and appraisal campaign offshore Israel.
I was proud that our management teams were able to deliver all of the Karish milestones on time and on
budget that were under their control. However, restrictions in the yard in Singapore due to COVID-19
meant that the FPSO was unable to leave for Israel in line with the original planned schedule. With the
impact of COVID-19 somewhat under control, the project is back on track to deliver first gas in Q3 2022
as per the updated timeline communicated to shareholders in the summer of 2021.
The team successfully delivered upon the latter two operational targets. Energean took FID on Karish
North (Israel) and NEA/NI (Egypt) in early 2021 and good progress was made on these and the other
growth projects across the portfolio. Finally, a rig contract was signed with Stena for the Israel drilling
campaign – drilling has started on the Athena well in March 2022.
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STRATEGIC REPORT
Our strategic direction and 2022 outlook
Energean’s purpose is to become the leading, gas focused E&P company in the Mediterranean, with the
highest of ESG and HSE standards at the heart of our operations. Our aim is to grow the company to
become a 200 Kboe/d producer and a $1.4 billion per year EBITDAX generator.
We’re focused on full-cycle organic growth. Step one is to bring Karish onstream, which is on track for
Q3-2022. The next steps will be to deliver all our sanctioned projects to achieve our medium-term targets
and successfully execute the Israel growth drilling campaign.
In regards to capital allocation, in 2021 the focus was on refinancing to create a more sustainable capital
structure. In 2022, the focus is the definition of our dividend policy and how best to return value to
shareholders. Finally, the heart of our strategy is the overarching need to grow sustainably. We will
achieve this by reducing our carbon intensity, as set out in our Climate Change Plan, and continuing to
operate safely and responsibly.
To summarise, our priorities for 2022 are fourfold. (1) Ensure the successful delivery of our projects
(targeting first gas at Karish in Q3 2022 and NEA/NI in H2 2022 as well as the Israel drilling campaign).
(2) Set the framework for providing sustainable returns to shareholders while continuing to grow
organically. (3) Delivering energy responsibly and safely on our path to net-zero. (4) Continue to focus on
our people, culture and infrastructure in our transition to a 200 Kboe/d company.
I thank you, our shareholders, new and existing, for your continued support. We look forward to repaying
your investment in the near future.
Karen Simon
Independent Chairman
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STRATEGIC REPORT
Chief Executive’s Review
Mathios Rigas, Chief Executive Officer
2021 was another year shaped by the COVID-19 pandemic. I am proud to say that we tackled these
challenges head on and delivered on all promises within our control (two projects sanctioned, Israel
drilling campaign rig signed, capital structure optimised, y-o-y emissions reduced and more). As
vaccinations rolled out, countries opened up and global energy demand rose dramatically. There has
been sustained growth in global commodity prices, especially European natural gas. This, alongside
production outperformance16, resulted in a year of fantastic financial results for Energean, as I go into
detail below.
Against a back-drop of working from home and travel disruption, we also successfully integrated Edison
E&P, and geared ourselves up for a major year of transformation in 2022, getting ready to deliver Karish,
the exploration campaign in Israel and our other development projects across the portfolio. We’ve set the
scene for a very exciting 2022.
Strength in numbers
It is with great pleasure to report that 2021 was an outstanding year for Energean, with record financial
results and solid operational performances from our existing assets. Production from our assets in Egypt
and Italy, which we acquired through the Edison E&P transaction, performed well as a result of intelligent
asset management, enabling the group to deliver full year production above initial market guidance
(41.0 Kboe/d (72% gas). This, complemented by the new and seemingly sustained paradigm shift of gas
prices seen across Europe, resulted in a 48% and 96% year-on-year increase in revenue and EBITDAX to
$497.0 million and $212.1 million respectively.
One of our goals for 2021 was to reduce our receivables position in Egypt – and we succeeded thanks to
our commitment and belief in Egypt as an investment case. We ended the year at $95 million,
representing a 36% y-o-y reduction. This continues the trend of materially reducing the receivables
balance since the economic reference date of the acquisition of Edison E&P (1 January 2019:
$240 million).
In 2021, we raised over $3 billion from debt capital markets to refinance our existing debts. In doing so,
we extended our weighted average maturity to approximately six years, pushed out commencement of
major debt repayment obligations to 2024 and converted floating to fixed interest rates. We ended the
year with over $1 billion of liquidity, ensuring we are fully funded to deliver our projects and are protected
from inflationary pressure on rates, all while reducing our target leverage and setting the foundation for
a sustainable dividend.
Strong progress on our growth projects
Although COVID-19 caused challenges and impacted productivity, good progress was made on our
flagship multi-tcf Karish gas development offshore Israel, which was approximately 92.5% complete at
year end 2021. At the time of writing, we are gearing up to leave the yard in Singapore, with first gas
anticipated by Q3 2022. Thereafter, Karish will enable us to deliver substantial free cash flows, based on
fixed contracts with floor pricing and take or pay provisions. This will form the basis of a sustainable and
recurring dividend going forward.
However, Energean is not only a Karish production story.
We have an ambitious five-well drilling programme in Israel, (three firm and two optional), in which our
two gas prospects boast high possibility of success rates and sit within a geological trend that has seen
11/11 wells hit gas. Our wells will be drilled using Stena Drilling’s Stena IceMax rig that, at the time of
writing, is on route for Israel and will commence operations in March 2022. The campaign has the
potential to double the Israel gas resource base. First results from Athena are expected in Q2 2022. A
positive result would be pivotal in derisking the remaining 48 Bcm (1.7 Tcf)17 of prospective resources in
the block, as well as the surrounding area.
16 Compared to our January 2021 guidance.
17 As per D&M’s YE21 CPR Report.
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We are extremely excited to see the continued growth and development of a regional gas market. There
is ongoing and projected high demand for natural gas across the region. This drives our operations, both
new wells and near-term production at Karish. Importantly, this new resource will also enable Energean
to continue its support of the regional energy transition, through coal-to-gas switching in the
East Mediterranean.
In 2021, we also sanctioned five projects in Israel, Egypt and Greece. Over the year, we made strong
progress on these and on our other sanctioned projects in Italy. All projects remain on track and on
budget and will deliver over 824 billion boe in total18) of 2P reserves (82% gas), as per our gas-focused
strategy, and provide high-return opportunities, in line with our disciplined capital allocation policy.
Our entire portfolio will contribute to our projected transformation into a 200 Kboe/d producing and $1.4
billion EBITDAX generating company. This transformation accelerated with the value created through the
acquisition of Edison E&P.
Advancing a ‘just’ energy transition
The IPPC’s 2021 report and global pledges agreed at COP26 emphasised the need for meaningful action
to tackle climate change. At Energean, ultimate responsibility and accountability for our environmental
and climate change policy, strategy and targets lie with me. In 2021, Energean made great strides
towards its commitment to become a net-zero company by 2050.
I am immensely proud that in 2021 we published our debut climate change policy, which set out a clear
roadmap for reaching our net-zero target in the short, medium and long-term. We also reduced the carbon
intensity of our operations by more than 70% versus our base year of 201919, and we are focused on
reducing our methane emissions via enhanced monitoring and planned upgrades to existing equipment
over the coming year. Moreover, our zero-routine flaring policy is now fully effective across the entire
portfolio and we have ‘green electricity’ agreements in place at operated sites in Israel, Greece and Italy.
In addition, we continued to disclose all relevant climate-related data in line with TCFD and
CDP recommendations.
At the time of writing, we have also awarded a carbon storage service contract to Halliburton for our
Prinos CCS project. The project is the first of its kind in Greece and an invaluable project that will help
reduce both our own emissions and those of nearby industry. We’re evaluating other low-carbon
opportunities across the rest of our portfolio too. For our efforts, we received the ‘Best ESG Energy
Growth Strategy Europe 2021’ award from CFI, reflecting that we’re tackling the transition with verifiable
actions that match our ambitions.
Health and safety remains a top priority
During 2021, we continued to ensure that our all our staff – from our production facilities and yards to
our offices – remained protected against COVID-19. Moreover, we continued our excellent safety record
– at a group level, and alongside our contractors, we achieved an LTIF 20 of 0.42 per million hours, down
33.3% from 2020 pro forma. In addition, we continued to support the local communities in which we
operate through donations, internship and funding opportunities.
Outlook for 2022 and dividend policy
2022 will be our biggest year yet. Karish and NEA/NI will be onstream and our drilling campaign in Israel
will have commenced. As announced in our 2021 FY Results, it is our goal to make reliable, recurring and
sector-leading returns to shareholders, targeting a first dividend to be paid no later than during Q4 2022,
following first gas from Karish (Q3 2022).
This is a major development for Energean and our external stakeholders. We have a positive history. We
were the most recent E&P IPO on the London Stock Exchange. We have raised multiple tranches of
capital on the back of successful operational development. We have successfully completed and
integrated the Edison acquisition.
Includes Karish, Karish North, Tanin, NEA/NI, Cassiopea and Epsilon.
18
19 Based on an equity share basis, where 2019 and 2021 emissions intensity is 66.8 kgCO2e/boe (excludes Edison) and
18.3 kgCO2e/boe.
20 Lost Time Injuries Frequency: The number of Lost Time Injuries per million hours worked.
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STRATEGIC REPORT
Energean is about to become a major, de-risked and profitable gas production company. I want to thank
all my colleagues who have contributed to this process. This new identity changes both the way we
interact with our shareholders and the broader external stakeholder community. We are entirely
committed to offering value upside and have proven our ability to deliver on our promises.
This is why we look forward to the future with such confidence. In a world that is hungry for energy, by
this time next year, we will have demonstrated that we can go from FID to production and that we can be
trusted to deliver year on year.
We have a fantastic team at Energean and I would like to thank them for their continued dedication and
commitment to delivering upon our goals and strategy.
Mathios Rigas
Chief Executive Officer
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STRATEGIC REPORT
Our Business Model
Our purpose
Energean’s aim is to lead the energy transition in the eastern Mediterranean through a strategic focus on
gas and achieve its net-zero ambition in advance of 2050, whilst delivering meaningful and sustainable
returns to our shareholders.
Our business model
Across each part of the hydrocarbon lifecycle we work to create value for our investors, host countries
and people.
Energean’s business model is to find and monetise hydrocarbons from its portfolio of assets across
the Mediterranean.
Our activities are focused on generating sustainable cashflow from production through selective
development and appraisal of the highest return growth options with a focus on those opportunities with
the lowest carbon intensities. We are focused on organic growth, but will continue to evaluate inorganic
opportunities that complement and supplement our strategic targets and ambitions.
Underpinning our business model is a strategic focus on gas and a commitment to be a net-zero emitter21
by 2050.
Our value life cycle
Find and Appraise
Through targeted exploration and appraisal in the Mediterranean we aim to find hydrocarbons, to build
reserves and resources, to monetise, or to selectively develop for future production. We have a ranked
portfolio of prospects for drilling and remain agile to take advantage of opportunities that support our
organic-focused growth strategy.
Develop
We focus on selective development of material hydrocarbon discoveries we have either found or
acquired. We invest in low-cost, high-return drilling options that lie in close proximity to existing
infrastructure and aim to deliver cost-effective, timely solutions to convert reserves into cash flows. In
developing these solutions, minimising carbon emissions is at the forefront of our minds, and we apply
an internal carbon pricing system in assessing all 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
from 100% renewable sources through the national grid in Greece, Israel, Italy and Croatia. In addition,
21 Scope 1 and 2 emissions.
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STRATEGIC REPORT
Energean is committed to evaluating carbon, capture and storage opportunities, and this will continue
into 2022.
Acquire
Energean also seeks to grow its portfolio through highly selective and value accretive M&A that are a
natural strategic fit, such as the Edison acquisition in 2020 and the consolidation of our Israel position
through the Kerogen acquisition22 in 2021.
Our Strategic Pillars
22 Energean’s acquisition of Kerogen’s 30% stake in Energean Israel closed on 25 February 2021.
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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, published in 2021, 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 net-zero basis
in respect of Scope 1 and Scope 2 GHG emissions.
As part of our commitment to a low-carbon future, in 2021 we have continued to align with the
TCFD recommendations.
Paris Agreement alignment
Energean is firmly committed to playing a leadership role in the energy transition process, supporting the
Paris Agreement, in particular Article 2.1(a)23 which states the goal of keeping the increase in global
average temperatures to below 2°C above pre-industrial levels and pursuing efforts to limit the
temperature increase even further to 1.5°C. To do this, as recognised in Article 4.124 of the Paris
Agreement, we are committed to achieving net-zero emissions by 2050.
In 2022, our portfolio has been tested against Paris-aligned scenarios developed by the International
Energy Agency (IEA). Commodity prices derived from supply and demand fundamentals and carbon
23 Article 2.1(a) of the Paris Agreement states the goal of ‘Holding the increase in the global average temperature to well below
2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels,
recognising that this would significantly reduce the risks and impacts of climate change’.
24 Article 4.1 of the Paris Agreement: In order to achieve the long-term temperature goal set out in Article 2, parties aim to reach
global peaking of greenhouse gas emissions as soon as possible, recognising that peaking will take longer for developing
country parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a
balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this
century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.
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STRATEGIC REPORT
prices created by the IEA have been used in this scenario analysis. Energean incorporates climate
change-related risks and carbon pricing into its decision-making. Please see pages 31-32 for the results
of this analysis.
Our climate change strategy
Short-term plan
Our short-term plan to reduce the Group’s absolute scope 1 and 2 emissions, includes: increased
efficiency of production installations by optimising performance, using low or zero carbon electricity and
re-focusing our production mix from oil to gas.
Figure 4. Climate change plan
2021 progress on reaching our emission reduction targets
•
•
In 2021, we reduced our equity share carbon emissions intensity to 18.3 kgCO2e/boe, a 8% reduction
y-o-y25.
In 2021, 72% of our working interest production was gas, down from 74% in 2020 (pro forma)26 but up
from 0% in 2019 (Energean standalone)
• Electricity-wise, agreements were put in place for the purchase of electricity from renewable sources
at all operated sites in Italy. Energean sites in Italy, Israel and Greece now operate under this policy.
As such, scope 1 and 2 absolute emissions in operated sites were reduced by 23%. Overall, 100% of
electricity purchased by Energean was generated from renewable sources during 2021.
• We assessed opportunities to establish Leak Detection and Repair (LDAR) procedures to monitor and
reduce fugitive emissions across all our operating sites. Campaigns are currently undertaken at
Vega, Italy
25 Current year-on-year reduction has been calculated based on the 2020 pro forma (includes Edison) equity share emission
intensity of 19.8 KgCO2e/boe.
26 2020 Pro Forma includes Edison.
Page 21 of 273
Figure 5. Short-term carbon emissions intensity reduction plan27
STRATEGIC REPORT
Medium to long-term plan
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. Energean is
currently working on various projects such as a Carbon Capture and Storage (“CCS”), a small-scale eco-
hydrogen production unit incorporating Negative Emissions Technologies (NETs) using biogas, and
opportunities to
in natural-based solution projects to create carbon removals from
the atmosphere.
invest
CCS Progress
At Energean, we believe there is considerable opportunity to employ efficient CCS technologies in the
regions we operate. Energean strives to become a leader in CCS in the Eastern Mediterranean and is
confident that we will be part of the solution. Besides capacity 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
company's depleted reservoirs. Energean is well placed to realise such a project since we have over 40
years’ experience in managing reservoirs, studying the geology and market developments.
In 2021, we began pre-FEED at our Prinos CCS project in Greece. The project received support in May
2021 from the Greek state under the EU post pandemic Recovery and Resilience Fund (“RRF”). The
project’s stated objective is to capture an initial 1 MMtpa of CO2 from sources within 150 km of Prinos
on-shore Sigma plant. We estimate that in the longer term the Prinos subsurface strata are sufficient to
sequester up to 100 million tons of CO2, with significant volumes arriving in Prinos by ship. In March
2022, Halliburton was awarded a service contract to assess the carbon storage potential of the
Prinos basin.
A further project to develop an eco-H2 plant located within the existing Sigma plant is also being
evaluated. The project is expected to provide an innovative ‘Low-Carbon Hydrogen’ process offering best-
in-class carbon capture efficiency (99+%), high energy efficiency compared to Blue-H2 negligible water
use, and minimal land footprint. Natural gas will be converted into H2 and CO2 through an oxy-
combustion process with a carbon capture efficiency of over 99%. The resultant carbon dioxide will be
sequestered in the Prinos CCS. The project is seeking support from the Important Projects of Common
European Interest (“IPCEI”). The use of untreated biogas, ideally with biomass and waste integration is
also being considered. This will allow us to become a pioneer in “Bio-H2 with CCS”, enabling the whole of
Energean to have a net negative output of CO2 emissions.
27 2019 is pre-Edison acquisition inclusion.
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STRATEGIC REPORT
Risks and opportunities
Climate change related risk and opportunities have been identified, and future scenarios that aid in
developing an integrated strategy approach have been analysed. Our strategy and business contribute
to limiting global warming and has been structured, and is currently being implemented, in three different
phases; short, medium and long-term, as per our Climate Change Policy published in 2021.
Physical risks
Risk
Acute
Description
Financial
impact
Rising sea level coupled with extreme
flooding may cause problems to the
steady state of Energean’s assets. This
may also result in damage to
infrastructure and increase
associated costs.
Increased severity of extreme weather
events may lead to reduced revenue
from decreased production capacity,
transport difficulties and supply chain
interruptions. Early retirement of
existing assets may possibly arise, e.g.
damage to property in “high-risk” asset
locations.
Chronic
Atmospheric or sea temperature rises
may cause faster degradation of the
company’s infrastructure and
necessitate operational changes to the
running of the plants.
Increased operating costs may arise
from potential inadequate water supply
for energy producing plants due to
changes in precipitation patterns. In
addition, increased insurance premiums
may occur for insuring assets at high-
risk locations.
Time-horizon
Long-term
Long-term
Energean’s
response
(mitigation)
Energean is monitoring the weather
conditions near its assets and has built
protective barriers to combat potential
flooding. Energean has also installed an
underwater analyser on one of its
platforms in Greece to monitor seawater
conditions (wave speed and direction).
No extreme weather events have
occurred to date, but the threat remains.
Energean’s environmental department is
monitoring the conditions at all sites
and reports this data at the asset and
corporate level. This data is being
incorporated into assessments of both
existing and new projects.
Geographies
impacted
Our onshore asset in Egypt is
considered at highest risk
All assets in all countries
Metrics used
to assess risk
Air temperature and sea-level
measurements
Air temperature and sea-level
measurements
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STRATEGIC REPORT
Transition risks
Risk
Policy/Legal
Technology
Market
Reputation
Description
a) EU Emissions Trading System (ETS)
prices are set to increase, resulting in
higher operational costs (in Greece)
and possible additional taxes for
exceeding GHG emissions.
b) Energean’s operations in Israel may
be subject to future carbon taxation
due to the capacity of the thermal
units. Carbon taxing schemes are not
yet enforced outside the EU.
Financial impact a) Increased pricing of GHG emissions
may lead to increased operating costs
(e.g. higher compliance costs and
potential increased insurance
premiums). Assets that emit
extensively may be subject to early
retirement due to policy changes.
Regulatory changes in the EU ETS shall
gradually lead the company to no
longer receive free GHG allowances,
leading to increased operational costs.
The company currently receives
allowances and has a portfolio of
allowances that may be used in future
years. The number of free allowances
decreases y-o-y.
b) Carbon emissions taxes may be
applied in the future in Israel, which
would increase the operational costs.
The development of new
technologies and alternative
energy sources may result in
reduced demand for the
company’s products.
Increased energy demand may
also accelerate the
development of renewable
energy production and
storage.
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. Please refer
to pages 31-32 in this report
for more details.
Changing customer
behaviour, as well as
changes in demand or supply
may lead to uncertainty in
market signals.
Pollution incidents, both
through liquid spills and GHG
emissions, may lead to the
loss of investor confidence
and subsequent loss of
revenue.
The Market risk may lead to
reduced demand for goods
and services due to a shift in
consumer preferences. This
may also affect the cost of
production and increase the
price of energy, water and
waste treatment. As the
supply of products may
change in the future, a re-
pricing of assets may take
place due to fossil fuel
reserves, land valuations etc.
Poor reputation may
adversely impact the
company by decreasing the
demand for its goods and
services. It may also reduce
the company’s production
capacity, due to delayed
planning approvals and
supply chain interruptions.
A negative reputation may
also block access to finance
as investors move away from
E&P companies and cause
litigation damage from
climate action.
Time horizon
Medium term
Long term
Long term
Short, medium and long term
Page 24 of 273
Transition risks
Risk
Policy/Legal
Technology
Market
Reputation
STRATEGIC REPORT
Energean’s
response
(mitigation)
a) Energean is currently evaluating the
development of a CCS site in the Prinos
asset, which has been included in the
Recovery & Resilience Fund (RRF)
implementation proposal for Greece.
Further to that, Energean's Eco-
Hydrogen unit proposal (blue-hydrogen
with carbon capture of more than 99%)
has been submitted to the Important
Projects of Common European Interest
(IPCEI), which would operate alongside
the Prinos CCS site.
b) Energean has imposed a shadow
price to be used as a sensitivity tool in
order to assess the viability of the
project in Israel. The annual free cash
flow was not significantly
affected and the project was proven
not to lose value in the face of
carbon taxation.
Energean fully incorporates
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.
Energean fully incorporates
climate change-related risks
into 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.
Energean is assessing the
risks associated with
pollution, including climate
related risks, at the company
and asset level and takes all
necessary control and
mitigation measures which
are reviewed the Audit & Risk
Committee on an annual
basis and included in the
business risk management.
Geographies
impacted
Greece (assets participate in the EU
ETS) and Israel (Energean’s largest
future source of production).
Greece and Italy are
considered to be the most
vulnerable assets regarding
oil production.
Greece and Italy are
considered to be the most
vulnerable assets regarding
oil production.
Highest risk related to oil
production assets in Greece
and Italy.
Metrics used to
evaluate risks
Annual carbon taxes paid
Realised commodity price
Cost of production (see
pages 37-38), cost of energy
& water
Hydrocarbon spills & revenue
(see pages 37, 71)
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STRATEGIC REPORT
Opportunities
Opportunities
Resource efficiency
Energy source
Products/services
Markets
Resilience
Description
Financial
impact
a) The continuous
development of technology
provides new opportunities
in the field of resource
efficiency. Optimized
operations are able now to
consume less water and
energy, increasing the value
of fixed assets and the
production capacity.
b) Reinjection of sour gas in
Prinos field instead of
processing it and thus
reducing energy
consumption.
a) Potentially resulting in
increased revenues, while
transition to more efficient
buildings or application of
more efficient available
technology may lead to
reduced operating costs
through efficiency gains and
cost reductions.
b) Reduces cost of
processing sour gas and
enhancing production
through sour gas reinjection
to the field.
The energy transition creates the
opportunity for Energean to
reorient its portfolio towards gas,
which is deemed to be a transition
fuel, and correspondingly increase
production capacity.
The re-oriented portfolio leads to
reduced operational costs due to
lower process needs of the final
product, which is mainly natural
gas. The reduced exposure to
GHG emissions due to the change
in the energy mix leads to less
sensitivity to changes of carbon
cost. Additionally, the energy shift
favours the company as there is
increased capital availability with
more investors to be interested in
lower emissions producers.
Finally, reputational benefits may
be resulting due to the increased
demand of low carbon services.
Development and/or
expansion of low emission
goods and services.
Energean expects the
development of
appropriate carbon
capture, and storage
(CCS) technology in
conjunction with blue-
hydrogen to provide low
carbon energy to the
market. We also expect to
provide the opportunity to
third parties to sequester
their emission in parallel.
The products and services
that emerge from CCS
and Blue-Hydrogen may
increase the revenues
through demand for
products and services
with lower or zero
emissions. Providing
products of this kind
provides better
competitive position to
reflect shifting customer
preferences, resulting in
increased revenues.
Energean’s gas
focused strategy
is aligned with the
East Med’s rising
gas demand.
The company’s
resilience to commodity
price fluctuations
comes hand in hand
with the new market
opportunities.
Transition to gas
production is
considered the key to
Company’s enhanced
resilience to climate
change.
Gas is considered
to be the transition
medium to a low-
carbon future
enhancing
Company’s
position with
increased
revenues.
Energean’s focus on
gas, which is a lower
carbon fuel than oil,
combined with the long-
term gas contracts with
floor pricing in Israel
and Egypt, protects the
Company’s revenue
stream from
commodity price
fluctuations.
Time horizon
Short to medium
Short, medium and long term
Medium to long term
Short term
Short to medium term
Page 26 of 273
Opportunities
Opportunities
Resource efficiency
Energy source
Products/services
Markets
Resilience
STRATEGIC REPORT
By shifting its portfolio towards
gas, Energean can reduce its
carbon emissions intensity whilst
also increasing production
capacity. Gas will make up 80% of
its portfolio and Energean is
investing in new gas-orientated
assets included in the Edison E&P
portfolio.
Energean aims to
capitalise on the
opportunity presented by
CCS by drawing on the
company’s existing
expertise in managing
reservoirs. Further to that
Energean seeks the
opportunity to develop
Blue-Hydrogen projects in
conjunction with the CCS.
Shifting
production from
oil to gas has
already
commenced by
investing in gas
fields that will
further expand
following
Company’s policy.
Shifting production
from oil to gas has
already commenced by
investing in gas fields
that will further expand
following
Company’s policy.
Energean’s
response
(strategy to
realise
opportunity)
a) Energean assigned the
management of climate
change projects to a group
company in Egypt named
Egypt Energy Services
(EES), engaged with energy
efficiency projects from
cradle to grave and projects
also related to low carbon
energy generation and
carbon sequestration.
b) An engineering study of
the re-injection process,
modification of existing
infrastructure, construction
of new equipment and
vessels and additional pipe-
laying will need to be
implemented.
Geographies
impacted
Existing assets in Greece,
Italy and Egypt are
initially targeted.
All assets in all countries
Israel and Egypt
are the Company’s
main
gas producers.
Israel and Egypt are the
Company’s main
gas producers.
Initially Greece and
subsequently Italy by
utilising depleted fields.
Further to that Energean
also considers its
opportunities to develop
such projects in Israel as
the Company’s future
highest production asset.
Metrics used
to evaluate
opportunity
Total water usage and total
energy consumption
intensity (pages 70-71)
% of production which is gas and
operational costs
(pages 37-38, 69)
CCS and hydrogen related
revenue streams
Ability to attract
investment
Revenue (page 37)
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STRATEGIC REPORT
For further information on how Energean manages and mitigates the above risks, please refer to the Risk
Management section between pages 79-103.
The company took decisive steps to adjust our business strategy to not only mitigate climate change-
related risks but also to capture opportunities. Over the past five years, Energean shifted its portfolio from
100% oil to more than 70% gas, recognising that gas plays an important role as a bridge fuel in the
transition to a lower-carbon future. For example, in Israel, gas produced from our operations will be key
in replacing high-carbon coal power plants and thus, will play a big role in lowering the country’s
absolute emissions.
Scope 3 emissions
For a consecutive year, Energean has calculated its scope 3 emissions, including the emissions from the
use of our products. This data can be found on page 70 in the CSR section – 2021 data will be disclosed
in this year’s CDP Report. As a next step, Energean will consider tangible actions to reduce our scope 3
emissions. Among other things, Energean will consider suppliers’ and contractor’s environmental
awareness and emissions management in future procurement processes. We are also considering giving
our customers the opportunity to sequester their scope 1 emissions in our future CCS projects.
Recognitions of our climate change strategy
Energean continued its participation in the Climate Disclosure Project (“CDP”) in 2021, in which we
promoted disclosure transparency and further developed our climate change initiatives.
The climate change rating assesses the level of detail and comprehensiveness of the content, as well as
the company's awareness of climate change issues, management methods and progress towards action
taken on climate change.
The supplier engagement rating assesses performance on governance, targets, scope 3 emissions, and
value chain engagement.
We were awarded an improved score of B on climate change (up from B- in 2020) based on our strategy
and set targets. We were also awarded an improved score of A- on supplier engagement (up from B
in 2020).
Supporting climate change initiatives
Energean supports the goals of the Paris Agreement, and for the second year we are reporting in
alignment with the recommendations of the TCFD.
The table below sets out where you can find Energean’s TCFD disclosures throughout the Company’s
2021 Annual Report and Accounts.
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
Pages 115-
116, 127-128
b) Describe management’s role in assessing and managing climate-related risks
and opportunities
Pages 116-
117
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
Pages 23-27
Pages 23-27
Pages 31-33
Risk Management: Disclose how the organisation identifies, assesses, and manages climate-related
risks
Page 28 of 273
STRATEGIC REPORT
Index to disclosures
aligned to recommendations of the Task Force on Climate-related Financial Disclosures
a) Describe the organisation’s processes for identifying and assessing climate-
related risks
Pages 79-82
b) Describe the organisation’s processes for managing climate-related risks
Pages 98-100
c) Describe how processes for identifying, assessing, and managing climate-related
risks are integrated into the organisation’s overall risk management
Pages 79-82
Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-
related risks and opportunities where such information is material
a) Disclose the metrics used by the organisation to assess climate-related risks and
opportunities in line with its strategy and risk management process
Pages 38-39
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
Pages 69-71
Pages 20-22
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 ensure at least 100% reserves replacement on an annual basis.
Our exploration portfolio is spread across the Mediterranean and represents a balanced mix of new
frontier areas and lower risk mature basins. Our Israel drilling campaign commenced in March 2022.
Targets include Athena on Block 12, which lies between the Karish and Tanin leases, where a discovery
would significantly de-risk the surrounding acreage. In 2021, we sanctioned Karish North (Israel), NEA/NI
(Egypt) and Epsilon (Greece), which will see the commercialisation of approximately 294 MMboe of 2P
reserves, 82% of which is gas.
5
Value and returns-driven
Disciplined capital allocation that prioritises total shareholder returns is a top priority for Energean. In
2021, we optimised our capital structure via the raise of over $3 billion of debt, which has extended the
average life of debt to approximately 6 years while ensuring we move towards a net debt/EBITDAX target
of less than one and a half times.
At the heart of this priority is our goal to make reliable, recurring and sector-leading returns to
shareholders, targeting a first dividend to be paid no later than during Q4 2022, following first gas from
Karish (Q3 2022). 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 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 $1.85/boe acquisition price that we achieved for
Kerogen’s 30% holding in EISL.
Page 29 of 273
Business model foundations
STRATEGIC REPORT
These are the building blocks that every E&P business need and are critical foundations for what we do
and how we do it.
Safe, Reliable and Responsible Operations
We value the safety of our workforce above all else and focus on maintaining a safe operating culture
every day. This culture of safety also improves the integrity and reliability of our assets.
Partnerships and Collaboration
We aim to build long-term relationships with our key stakeholders, and partner with leaders of industry
to find innovations that can improve efficiency and deliver low carbon solutions.
Talented People
We work to attract, motivate and retain talented people and provide our employees with the right skills
for the future. Our performance and ability to grow depend on it.
Governance and Oversight
Our board has a diversity of knowledge, expertise, and ways of thinking that help us grow our business,
manage risks and continue to deliver long-term value.
Technology and Innovation
New technologies help us produce energy safely and more efficiently. We selectively invest in areas with
the potential to add greatest value to our business, now and in the future, including lower
carbon solutions.
Page 30 of 273
STRATEGIC REPORT
TCFD Scenario Analysis
Portfolio resilience
Since 2021, in line with the TCFD’s recommendations, we have tested the resilience of our portfolio
against the scenarios from the International Energy Agency’s (“IEA”) World Energy Outlook (“WEO”) report
to address the risks and opportunities presented by a potential transition to a lower-carbon economy.
Resilience is defined as the ability to generate value in a low-price environment.
We have chosen to use the IEA scenarios as it enables standardisation in approach and comparison
between companies. The IEA’s scenarios change slightly each year — in the 2021 WEO report, the four
scenarios are:
IEA’s 2021 WEO climate scenarios
Stated Policies
Scenario (STEPS)
Announced Pledges
Scenario (APS)
Provides a
conservative view,
assuming not all
climate
commitments will
be met
Assumes that all
climate
commitments
made by
governments will be
met in full and
on time
Sustainable
Development
Scenario (SDS)
An integrated
scenario specifying
a pathway to reach
three of the UN’s
Sustainable
Development Goals
Net-zero Emissions
by 2050 Scenario
(NZE)
Sets out a narrow
but achievable
pathway for the
global energy sector
to achieve net-zero
CO2 emissions by
2050
2.0°C
1.8°C
1.7°C
1.5°C
$77/bbl
$67/bbl
$56/bbl
$36/bbl
$7.7/MBtu
$6.5/MBtu
$4.2/MBtu
$3.6/MBtu
$90/tonne
$200/tonne
$160/tonne
$250/tonne
Overview
2050
temperature
rise
2030 oil
price
2030 EU
gas price
2050
carbon
price
Methodology
We have applied the IEA’s price forecasts for each scenario to our portfolio and have compared the
impact on the net present value (“NPV”) for each country versus our base case assumptions. We have
not included our exploration assets in this analysis.
The IEA provides 2030 and 2050 oil and gas prices for each scenario. It also provides 2030, 2040 and
2050 carbon prices for each scenario. We have assumed a straight-line increase between the price points
and then assumed flat prices from 2050 onwards. Because the IEA provides general oil and European
gas prices, we have taken the differential between their base case and their forecast and applied this to
our 2020 base case for Brent and the various regional gas prices to generate comparable commodity
price forecasts.
The impacts to net present value described below are based on the development of our 2P reserves
position ‘as is’, and do not include any unsanctioned steps that we are taking to mitigate the impacts of
climate change.
Page 31 of 273
STRATEGIC REPORT
STEPS
APS
SDS
NZE
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
█
Results
Net Present Value of portfolio28
Israel
Egypt
Italy
Greece
UK
Croatia
Impact on NPV
█ >0%
█ 0 to -5%
█ -6 to -15%
█ -16 to -25%
Our portfolio continues to create value under all scenarios and our gas-focused business positions us
strongly to adapt to changing demand in a carbon-constrained world.
Under the NZE, the NPV is reduced by 5% overall compared to the base case, but remains positive. This
is because the portfolio is 81% gas weighted (2P reserves, end-2021), and thus is largely protected
against falls in oil prices.
In Israel, gas revenues are protected against fluctuations in international commodity prices as there are
fixed gas contracts with floor pricing. Only under the NZE is there a minor impact on the NPV (-2%) due
to the price realised for the liquids stream. Likewise in Egypt, gas revenues are protected with floor pricing
— the change to NPV seen under the NZE is due to lower liquid prices received compared to our base
case forecast.
Our assets in Italy and Greece are more exposed to the effects of lower commodity prices under the
scenarios considered. We are already taking steps to mitigate this impact, and are looking at longer-term,
climate friendly solutions, including carbon capture solutions. Energean is a nimble operator with the
ability to deliver solutions that deliver maximum value for our shareholders, and we view scenario
analysis as a key tool in continuing to deliver upon this as we move into a lower-carbon world.
Finally, the scenario analysis utilises the IEA’s carbon prices. This has a positive impact on the NPV
because the IEA’s carbon price forecast is lower than Energean’s internal prices used in the base case
run for regions in which carbon taxes exist.
Inclusion of climate-related risks into decision making
Energean incorporates climate change-related risks into its investment decision-making. The findings of
the 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.
The Board is charged with reviewing investments for climate-related risks. The CEO and the Board
regularly discuss climate change-related issues such as investment decisions where climate change
considerations are a major driver and the carbon credit price’s impacts on Energean’s financial future.
28 Relative to Energean’s budget planning Brent oil price of $60/bbl.
Page 32 of 273
STRATEGIC REPORT
Our current portfolio remains resilient under the climate scenarios tested, and we expect to continue
helping meet global energy demand over the coming decades. We will continue to make capital allocation
decisions for our portfolio using rigorous planning assumptions flowing from the scenario analysis
exercise, such as the evaluation of FID of Irena in Croatia.
Internal carbon price forecast
Furthermore, Energean uses an internal price on carbon to stress-test new projects, acquisitions and
investments. This stress test allows us to measure the impact of an investment decision on the
company’s carbon footprint, and to determine whether any future investments brings us closer to our
net-zero 2050 target, Energean will not consider investing. Furthermore, the internal price on carbon
ensures that we include the possibility of additional carbon taxation schemes being introduced (within
our European markets and beyond), which would result in a reduction of our income and valuation on
individual assets. This impact can be seen when we run our asset impairment tests and in the annual
Competent Person’s Report (“CPR”) (an independent appraisal of our oil and gas assets).
In 2022, our internal carbon prices are:
Year
2022
2025
2035
2050
2022 ($/tCO2)
57
86
176
270
The above carbon price is based upon a forecast from the UK’s Business, Energy & Industrial Strategy
department, which in turn is linked to the IPCC’s forecast.
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, such as replacing wet seals with dry seals in compressors in Egypt, 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 33 of 273
STRATEGIC REPORT
Market Overview
Brent oil price
In 2021, oil prices experienced significant and steady recovery, buoyed by the continuous curtailment of
the COVID-19 pandemic and stabilisation of international commodities trade. Brent averaged $70.73/bbl
in 2021 – a 70% increase from 2020 levels and 12% above 2017-2019 average. Brent climbed significantly
from a low of $54.84/bbl in January 2021 to a high of $83.70/bbl in October 2021.
Our oil assets in Italy are Brent-linked as is the condensate from our gas assets in Egypt. Once Karish
starts to produce we expect to produce over 30,000 bbl/d of liquids in the medium term.
Focus on gas
Over 70% of our production is from gas fields. Gas prices from production in Italy, the UK and Croatia are
linked to the European gas market. Our contracts in Israel have fixed long-term prices. In Egypt, gas prices
are linked to Brent but include floor pricing.
European gas prices
European gas prices surged in 2021, with the Italian PSV reaching highs of €113.42/MWh in December
2021 – more than a 500% increase from December 2020 at €16.6/MWh, at the time we acquired the
Edison portfolio.
The increase in 2021 prices was driven by a combined impact of multiple factors, including (i) economic
recovery and increased demand for natural gas and power, (ii) low pre-winter storage capacity levels, (iii)
shutdowns of nuclear and coal power plants providing alternative sources of power, (iv) reduced
domestic European production, and (v) limited stockpiles of gas driven by limited gas flows from Russia
and competition for LNG cargoes with Asian importers29. NBP prices in particular were impacted by
weather patterns, with the wind speeds in the North Sea among the slowest in 20 years.
Israel
Gas
2021 was Israel’s 17th year of local natural gas production and the second in which both Leviathan (first
gas in December 2019) and Tamar (2013) were onstream. In 2021, approximately 11.1 Bcm was
produced by Leviathan and 8.3 Bcm by Tamar30. Of this, Leviathan exported 5.87 Bcm (3.27 Bcm to Egypt
and 2.6 Bcm to Jordan).31 Tamar exported 0.9 Bcm.
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 2021, demand for gas in Israel was approximately 11.9 Bcm32. Despite near-term pressure on demand,
Israel’s long-term gas demand outlook remains robust, with demand forecast to grow to 15.7 Bcm by
2025 and approximately 20.1 Bcm by 203532. Natural gas demand increase is driven by the enduring
growth in electricity demand, as well as by a transition of fuel mix, from coal and oil to natural gas and
renewables.
Liquids
Karish, Karish North and Tanin contains total 2P liquids reserves of 101 MMboe. The Energean Power
FPSO has onboard storage facilities that can store up to 800,000 barrels of liquid, which can be exported
via tankers.
In March 2022, Energean signed an exclusivity agreement and term sheet for the marketing of its Karish
liquids with a major trading desk.
29 Source: Bloomberg.
30 Delek Drilling’s Q3 2021 Financial Report.
31 Delek Drilling’s February 2022 Investors Presentation, slides 7-8.
32
Israel Ministry of Energy – Interim Report for the Examination of Government Policy on the Natural Gas Economy in Israel,
July 2021.
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STRATEGIC REPORT
Egypt
Egypt’s gas market has seen substantial change over the past two decades, owing to several large
domestic discoveries, headlined by Eni’s super-giant Zohr field in 2015. Zohr reached first gas in 2017,
enabling the country to move from being a net importer to net exporter of gas. Egypt also started
importing gas from Israel in January 2020, realising its ambitions to become a regional gas hub.
However, a lack of a major discovery since Zohr, combined with rising gas demand (65.4 Bcm in 2021
rising to 76.6 Bcm in 2028)33 will result in Egypt becoming a net importer of gas early this decade.
For this reason, in 2021, Energean signed a MOU with EGAS for the sale and purchase of up to 2 Bcm/yr
of natural gas on average for a period of 10 years, commencing with initial volumes of up to 1 Bcm/yr.
This also represents a commercialisation option for gas resources discovered in the 2022/23 Israel
drilling campaign. There are existing export pipelines from Israel to Egypt that Energean can utilise.
LNG export opportunities into Europe
Egypt possesses two liquified natural gas (“LNG”) plants, the Eni-operated 5.0 million tonnes per annum
Damietta plant and the Shell-operated 7.2 million tonnes per annum Idku (also known as ELNG) plant.
The plants are underutilised, only operating at approximately half of combined capacity in 202134.
European gas demand recovered in 2021 towards pre-COVID levels, but supply has only partially
rebounded year-on-year and has not yet recovered to 2019 levels35. As a result, Europe is an obvious
receiver of LNG exports from Egypt. As of end-2020, Europe had just under 40 LNG regasification
terminals, with a total storage and send-out capacity of 11,158,900 liquid cubic metres and 183.8
Mtpa respectively36.
33 Source: Fitch Solutions Egypt Oil & Gas Report, Q4 2021.
34 The Organization of Arab Petroleum Exporting Countries (OAPEC), January 2022.
35 The Oxford Institute for Energy Studies - Supply-side factors in the European gas price rally in 2021 and outlook for the rest of
winter, December 2021.
36 GIIGNL Annual Report 2020.
Page 35 of 273
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 202037, and in doing so, reinforced
its commitment to the Mediterranean region. The economic reference date of the transaction was
1 January 2019 and all results subsequent to this date accrue to Energean. However, for accounting
purposes, the figures for Edison E&P are only consolidated into the financial statements subsequent to
the completion date; all results between the economic reference date and the completion date are
reflected through a series of completion adjustments and are incorporated in the net consideration.
Throughout the Key Performance Indicators section, both 2020 operational and financial results are
presented on an actual and pro forma (Energean plus Edison E&P) basis.
Operational
We continued our strong track record of growing reserves and resources with a 25% y-o-y increase vs
202038, while production performance was 41.0 Kboe/d (72% gas), at the mid-point of the revised full
year guidance of 40.0 - 42.0 Kboe/d and above the initial guidance range given in January 2021 of 35.0 -
40.0 Kboe/d.
1 Working Interest Production
Working Interest Production
2021
Pro forma 2020
Kboe/d
41.0
48.3
2020
3.6
2019
3.3
Objective: Energean is focused on maximising production from its existing asset base and, in the
medium-term, delivering net production of at least 200 Kboe/d from its gas-weighted portfolio.
2021 progress:
• Average working interest production of approximately 41.0 Kboe/d
• 2021 production was lower than 2020 pro forma, mainly because of natural decline at Abu Qir
in Egypt
• Karish project approximately 92.5% complete at 31 December 2021
• Karish North, second oil train and gas riser, and NEA/NI sanctioned. All three projects on track for
their respective start-ups, (H2 2023, H2 2023 and H2 2022)
2
2P Reserves and 2C Resources
2P Reserves
MMboe
2C Reserves
MMboe
2021
965
2021
188
Pro forma 202039
202038
982
762
Pro forma 202039
2020
158
158
2019
342
2019
216
Objective: Energean aims to replace the reserves it has produced and grow its reserve and resource base
through a combination of successful exploration and appraisal and selective value accretive acquisitions.
37 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.
38 Before pro-forma adjustment for Kerogen acquisition.
39 Reserves are pro forma Energean + Edison plus the acquisition of Kerogen’s 30% holding in Energean Israel Limited (“EISL”).
The transaction closed on 25 February 2021.
Page 36 of 273
STRATEGIC REPORT
2021 progress:
• 25% year-on-year increase in 2P + 2C reserves and resources to approximately 1,154 MMboe, 72%
gas. Increase is versus 2020 i.e. before pro-forma adjustment for Kerogen acquisition.
• 2020 pro-forma includes the acquisition of Kerogen’s 30% holding in Energean Israel Ltd. The
•
transaction closed on 25th February 2021
In early 2021, increased equity interest in the producing Rospo Mare and Vega fields, offshore Italy, to
100% at zero consideration, adding approximately 12 MMboe of 2P oil reserves.
Financial
Energean is focused on increasing production from its large-scale, gas-focused portfolio to deliver
material free cash and maximise total shareholder return.
1
Revenues
Sales Revenues
$ Million
2021
497.0
Pro forma 2020
335.9
2020
28.0
2019
75.7
Objective: Energean’s medium-term target is to generate revenues in excess of $2 billion per annum. With
approximately 965 billion boe of 2P reserves to be monetised and a revenue growth profile underpinned
by gas sold under fixed price contracts, we at Energean believe this target is both achievable and
sustainable.
2021 progress:
• 2021 revenues of $497.0 million
• 2021 revenue was higher than 2020 pro forma primarily because of higher commodity prices
• A total of 18 GSPAs signed in Israel, taking total gas sales to 7.2 Bcm/yr on plateau, further enhancing
near-term revenues
• All GSPAs 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.
• MOU signed with EGAS for the sale and purchase of up to 3 Bcm/yr of natural gas on average for a
period of 10 years
• Hedged a total of 28% of expected 2022 Italian gas production, taking advantage of the strong
market pricing
2
Cost of Production40
Cost of Production
$/boe
2021
17.5
Pro forma 2020
11.3
2020
21.4
2019
21.5
Objective: Following completion of the Edison E&P acquisition Energean has started to implement
programmes to further the reduction of operating costs with the aim of creating a sustainable low-cost
business. The Group’s medium-term cost of production (operating costs plus all royalties) target is
$9-11/boe.
2021 progress:
• The increase in 2021 cash unit production cost versus pro forma was primarily driven by decreased
production and additional planned maintenance during extended summer shut-downs deferred from
2020 as a result of COVID-19. Additionally, production costs were also impacted by the strengthening
of Euro against the US Dollar during the period.
Integrated Edison E&P, evaluating and initiating a full, bottom-up internal review, including
• Operating cost reductions
• Third party tariff optimisation
• Mothballing
•
40 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 37 of 273
STRATEGIC REPORT
• Production efficiencies – e.g. higher than expected production in 2021 led to some efficiency
•
savings
Improve sales contracts – e.g. in 2021, a new GSA was signed with A2A for Energean’s entitlement
production in Italy (effective from April 2022). Additional contracts are under evaluation.
3
Adjusted EBITDAX41
Adjusted EBITDAX
$ Million
2021
212.1
Pro forma 2020
107.7
2020
(8.3)
2019
35.6
Objective: Energean aims to maximise EBITDAX to maintain the profitability of the business. The Group
expects to grow EBITDAX to $1.4 billion per annum in the medium-term through the successful delivery
of key growth projects.
2021 progress:
• 2021 adjusted EBITDAX of $212.1 million
• 2021 adjusted EBITDAX was higher than 2020 because of higher revenue partially offset by higher
operating costs from the enlarged group.
• 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).
• € 100 million funding package secured for the Epsilon redevelopment project (Greece)
• Rig contract signed for three firm and two optional wells, offshore Israel
4
Cash Flow from Operating Activities
Cash Flow
from Operating Activities
$ Million
2021
133.2
Pro forma 2020
2020
137.0
1.5
2019
36.3
• The decrease on a pro forma basis was primarily driven by payments made for buyers compensation
in Israel amounting to $23.0 million and cash held on account in relation to the commodity hedges in
Italy of $29.4 million.
5
(Loss)/Profit After Tax
Profit After Tax
2021
Pro forma 2020
$ Million
(96.2)
(416.4)
2020
(92.9)
2019
(83.8)
• The increase on a pro forma basis was primarily driven by higher revenues in 2021
Net-zero carbon emissions
Energean’s aim is to lead the energy transition in the eastern Mediterranean through a strategic focus on
gas and achieve its net-zero ambition by 2050.
1
Carbon Intensity Reduction Programme
Carbon Intensity
on equity share42
KgCO2e/boe
(Scope 1 and 2)
2021
18.3
Pro forma 2020
19.8
2020
37.9
2019
66.8
41 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’.
42 Energean has updated its emissions intensity reporting and now reports on an equity share basis versus the operated working
interest approach used in the 2020 Annual Report.
Page 38 of 273
STRATEGIC REPORT
Objective: In 2019, we were the first E&P company in the world to commit to net-zero emissions by 2050.
As part of this commitment, we pledged to reduce by the carbon intensity of our business, by 85% by
2023, versus our 2019 base year43.
Energean used internationally recognised standards and guidance to calculate its GHG emissions. We
followed the recommendations of the Greenhouse Gas Protocol, as well as guidance from IPIECA, the
UK’s Department for Environment, Food and Rural Affairs (DEFRA), the International Energy Agency (IEA),
the UN Intergovernmental Panel on Climate Change (IPCC) and the EU Emission Trading System. Our
scope 1 emissions under the EU ETS have been verified by TUV Austria Hellas.
2021 progress:
• We delivered a 8% year-on-year reduction in the carbon intensity of our operations to 18.3 kgCO2e/boe
on equity share basis
• Successfully rolled out the use of ‘Green Electricity’ at our operated sites and offices in Italy. This adds
to the ‘green electricity’ agreements introduced in Greece and Israel in 2020. As a result, on an
operational accounting basis (see pages 69-70 for details), 100% of Energean’s Scope 2 emissions
are now covered by green electricity, which has resulted in a 2021 scope 2 carbon emissions intensity
of 0 KgCO2e/boe (versus 1.9 KgCO2e/boe pro forma 2020)
• Reduced energy use intensity at our operating sites by 26% by optimising efficiency
HSE
Energean is fully committed to behaving responsibly and conducting its business with integrity in
everything it does.
1
Lost Time Injury Frequency Rate
LTI Frequency Rate
2021
Pro forma 2020
No. per million hours worked44
0.33
0.63
2020
0.65
2019
0.28
Objective: Energean is committed to managing its operations in a safe and reliable manner to prevent
major accidents and to provide a high level of protection to its employees and contractors. Our target is
to keep the LTIF Rate below 0.60.
2021 progress:
• Safe and reliable operations, zero serious injuries
• Zero environmental damage and zero oil spills
• Zero health damage and occupational illnesses.
Total shareholder return
In 2021, one of the priorities for the Board was to decide how best to provide returns to shareholders
whilst ensuring that the right level of reinvestment is maintained in the business.
One of the key and now completed milestones was the optimisation of the Group’s capital structure, in
order to set the foundation for future returns to shareholders. Through the raising of over $3 billion from
the debt capital markets, Energean extended its weighted average maturity to approximately six years,
pushed out commencement of major debt repayment obligations to 2024 and converted floating rates
to fixed rates. Energean ended the year with over $1 billion of liquidity, ensuring the Group is fully funded
to deliver our projects.
The dividend policy, approved by the Board as part of the full year results sets out the following
key parameters:
• Energean is targeting launch of its inaugural dividend, to be paid no later than during Q4 2022,
following first gas from Karish (Q3 2022).
43 Scope 1 and 2 emissions.
44 Refers to employees and contractors.
Page 39 of 273
STRATEGIC REPORT
•
It is the Company’s goal that shareholders will receive a sector - leading return on their investment
through dividends and continued organic growth while maintaining a disciplined capital
allocation policy.
• Energean targets paying dividends of at least $1 billion by the end of 2025. This is underpinned by
predictable cashflows, largely insulated from commodity price fluctuation, thanks to long-term gas
contracts with floor-price protection and high take-or-pay provisions.
• The Company expects to begin with a dividend of at least $50 million, which will be paid per quarter.
The amount will ramp-up in line with Energean’s medium-term production and revenue targets to at
least $100 million per quarter, as the Company’s fully sanctioned and funded developments come
onstream during the next 24 months.
• The Board and Management will regularly review its capital allocation to ensure that sufficient liquidity
remains within the Group, to continue Energean’s organic growth strategy and consider the potential
for opportunistic M&A and/or supplementary capital returns to shareholders.
• Post first gas from Karish, the Company expects a rapid deleveraging on a Group consolidated basis
to levels below 1.5x and sees this being met no later than 2024.
Figure 6. Share price performance versus peers since IPO45
45 Premier Oil now renamed as Harbour Energy following the Chrysaor merger.
Page 40 of 273
STRATEGIC REPORT
Review of Operations
Production
Group working interest production averaged 41.0 Kboe/d in 2021 (2020: 48.3 kbopd), at the mid-point of
the revised full year guidance of 40.0 – 42.0 Kboe/d and above the initial guidance range given in January
2021 of 35.0 – 40.0 Kboe/d. 2021 production was lower than 2020 pro forma, mainly because of natural
decline at Abu Qir in Egypt.
Working interest hydrocarbon production (Kboe/d)
2021
29.1
9.9
1.3
0.7
41.0
Egypt
Italy
Greece & Croatia
UK North Sea
Total
Israel
Karish Project
2020 pro forma
2020
35.4
9.1
2.0
1.8
48.3
1.4
0.3
1.8
0.1
3.6
% Completion
at 31 December 202146
% Completion
at 31 December 202046
Production Wells
100.0
FPSO
Subsea
Onshore
Total
98.4
83.6
99.9
92.5
100.0
93.0
76.0
99.9
87.0
The Karish Project was approximately 92.5% complete at 31 December 2021, as under the Group’s
contract with TechnipFMC. At the time of writing, the FPSO has entered dry-dock, the national grid has
been connected in Israel and Energean is gearing up operationally for first gas in Q3 2022. This timetable
expects approximately four – five months from sail-away to first gas, including the tow from Singapore
to Israel, hook-up and commissioning. Most of the commissioning and testing of mechanical and
electrical systems is being done in the yard before sail-away with the final commissioning work to be
performed offshore upon arrival in Israeli waters.
Energean Power FPSO Progress and Key Milestones
The Energean Power FPSO was approximately 98.4% complete, at year end 2021. In early 2021, all the
remaining minor lifting work (flare stack, helicopter-deck and portside crane boom) was completed. The
rest of H1 2021 was spent completing the connection between the topsides and the hull and completing
the marine systems in the hull. In H2 2021, the focus was on commissioning activities ahead of sail-
away. In December 2021, the penultimate major technical milestone associated with the construction of
the Energean Power FPSO was successfully completed. This involved testing the telescopic design of
the emergency flare stack which will allow the vessel to pass under the Suez Canal Bridge, hence avoiding
the need to either sail around Africa or to install the system in the Mediterranean Sea. This has further
reduced the environmental footprint of the construction phase whilst shortening the schedule.
46 As measured by project milestones under the TechnipFMC EPCIC.
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STRATEGIC REPORT
The remaining Q1 2022 milestones include the drydocking of the FPSO at the yard to clean the marine
life off the hull of the ship. This is a regulatory requirement from the Israeli authorities in order to enter
Israeli waters to avoid species contamination. The FPSO entered dry dock in Mid- March 2022.
Subsea and Onshore Progress
Subsea works were approximately 83.6% complete at year end 2021, with the risers, spools metrology
and 90-kilometre gas sales pipeline finished. The export pipeline was also successfully hydrotested
during this period, to ensure no leaks throughout the length of the pipe.
The outstanding work is to hook-up the risers to the FPSO, upon its arrival in Israel this year.
Onshore work was substantially complete at year end (99.9% under the Technip FMC EPCIC), with
construction and civil works completed. The remaining outstanding work is to finish the site restoration
work (e.g. replanting cleared trees).
The onshore pipeline was connected to the national grid in March 2022. Gas from the Karish field will
flow to the Energean Power FPSO, located 90 km offshore, where production output will be processed
and separated. The treated gas will then be delivered from an underwater pipeline to the land-based
system at the Dor Station before entering the national pipeline on its way to distribution companies and
end consumers.
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 H2 2023.
The production capacity from the first well is expected to be up to 300 MMscf/d (approximately 3
Bcm/yr). A second well is expected to be drilled in 2026 and, combined with later life workovers to both
wells, is expected to be sufficient to fully develop the 744 MMboe of 2P reserves.
Second Oil Train and Gas Sales Riser
In May 2021, Energean took FID on two high-return growth projects. The first, a second oil train on the
FPSO that will increase the liquids capacity from 18 Kboe/d to 32 Kboe/d, at minimal incremental
operating costs. The second, a second gas sales riser, will enable gas production at the full 8 Bcm/yr
capacity of the FPSO.
In December 2021, Energean signed an EPC contract with KANFA AS for the second oil train.
Both projects made good progress in 2021 and are expected onstream in H2 2023.
GSPAs
Existing GSPAs
Energean has signed 18 gas sales agreements (“Agreements”) for the supply of 7.2 Bcm/yr of gas on
plateau, representing almost 100% of total gas reserves volumes over the life of those Agreements. All
Agreements include provisions for floor pricing and take-or-pay and / or exclusivity, providing a high level
of certainty over revenues from the Karish, Karish North and Tanin projects over the next 16 years.
In 2021, for one agreement representing 0.2 Bcm/yr and commencing 2024, the buyer was unable to
meet its conditions subsequent under the Agreement and the parties have mutually agreed to terminate
the Agreement. This termination is not related to the project schedule.
In addition, in November 2021, further to its initiation of arbitration proceedings, Dalia sent notices to
Energean purporting to terminate its gas sales agreement (which represents 0.8 Bcm/yr of contracted
gas sales), whilst also attempting to reserve its rights by claiming that should the notices be determined
to be invalid or wrongly issued, the gas sales agreement would not have been terminated.
Energean believes that the notices served by Dalia are invalid and constitute a material breach of contract,
giving it the right to terminate the contract. Energean has exercised this right and, as part of the same
arbitration proceedings, is seeking to recover damages suffered by it as a result of such termination. The
amount of the damages will depend on the price that Energean is able to achieve for the gas that would
have been sold to Dalia. This is currently estimated to be between $105-$407 million.
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STRATEGIC REPORT
Alternative commercialisation opportunities
Energean has identified a number of incremental buyers for its gas reserves and prospective resources.
In Israel, the third gas fired power plant auctioned as part of the IEC privatisation process (Hagit) was
awarded. At the time of writing, the winning consortium is seeking gas supply.
In December 2021, Energean signed an MOU with EGAS for the sale and purchase of up to 3 Bcm/yr of
natural gas on average for a period of 10 years, commencing with initial volumes of up to 1 Bcm/yr. This
represents a commercialisation option for gas resources discovered in the 2022/23 drilling campaign.
Energean and EGAS have identified existing transportation routes for the delivery of these volumes.
Moreover, it does not impact any of the existing GSPAs signed in Israel.
Energean is confident of selling all volumes profitably and commercial discussions are underway with a
number of domestic and international buyers.
Exploration
Energean’s preparatory work ahead of the offshore Israel drilling campaign progressed in line with
expectations during 2021. In June 2021, Energean signed a rig contract with Stena Drilling for the Stena
IceMax drillship. The contract is for the drilling of three firm wells and two optional wells.
Drilling commenced in March 2022 and has the potential to double the Israel gas resource base. Targets,
in order of drilling sequence, include:
• Athena (Block 12) – Exploration – Firm
• Situated between the Karish and Tanin leases, Athena is estimated to contain 21 Bcm (totalling
140 MMboe) and has a 77% possibility of success.
• Success at Athena would significantly de-risk the remaining 48 Bcm (1.7 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); ii) the absence of any
seller royalties on production from the lease and; (iii) no export restrictions, which enables it to
realise competitive export prices
• Karish Main 4 – Appraisal – Firm
• Karish North – Development – Firm
• Hermes (Block 31) – Exploration – Optional
• Hercules (Block 23) – Exploration – Optional
The topholes for the three firm wells will be batch drilled. The first Karish North development well is being
drilled as part of this programme to achieve cost synergies.
Audited Prospect Size
MMboe47
Audited Possibility of
Success (PoS)47
140
176
77%
72%48 (PH only)
Well
Type
Athena-01
Exploration
Karish Main-04
(inc. Pilot Hole)
Appraisal
(inc. Exploration)
KN-04 ST-04
Development
Hermes-0149
Exploration (Optional)
Hercules-0150
Exploration (Optional)
197
165
Developing 2P reserves
(86% gas)
100%
56%
37%
47 Based on the YE21 Israel D&M CPR.
48 Primary Exploration Target.
49 Audited figure for Hermes not including Gas upside in Tamar D Sand (27 Bcm GIIP).
50 Audited figure for Hercules not including Liquids upside in Mesozoic carbonates (270 MMbbl OOIP) and Gas upside in Tortonian
sands (11 Bcm GIIP).
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STRATEGIC REPORT
Acquisition of Kerogen Capital’s 30% Holding in EISL
In February 2021, Energean closed the 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 and structure and adds 2P reserves of 219
MMboe (approximately 80% gas) enlarging the Group’s reserves to around 1 billion boe.
Egypt
Production
The Abu Qir gas-condensate field offshore Egypt is the largest producing asset in the Group’s portfolio.
The field delivered 29.1 Kboe/d of working interest production in the 12 months to 31 December 2021,
approximately 87% of which was gas, around the mid-point of guidance (28.5 – 30.0 Kboe/d). Q4
production was impacted by scheduled work-over activities, which ultimately enhanced the year end exit
rate. Production decline will be reversed from 2023 with the ramp-up of production from NEA/NI from
H2 2022 and the positive impact of the Abu Qir infill programme.
Development
NEA/NI subsea tieback
In January 2021, Energean sanctioned the NEA/NI project, which is in shallow-water offshore Egypt and
neighbouring the Abu Qir concession. An EPCI contract for the four subsea wells and the associated tie-
back to the Abu Qir NAQ PIII platform and associated infrastructure was awarded to TechnipFMC in
February 2021. The integrated NEA/NI project is expected to deliver first gas from one well in H2 2022
and from the remaining three wells in H1 2023. The project contains an estimated 53 MMboe of 2P
reserves and 2C resources according to D&M. Peak working interest production is anticipated to be 60
MMscf/d plus 1.7 kbopd of condensate and LPG. TechnipFMC was awarded the EPIC contract to deliver
the project.
As of year-end 2021, NEA/NI was 37.0% complete. The manufacturing of equipment has progressed as
per the schedule and offshore work will begin in early 2022.
On 9 January 2022, the rig contract for the four well drilling campaign was signed with EDC for the El
Qaher-1 jack-up rig. The drilling campaign is expected to begin in H2 2022.
Abu Qir infill drilling programme
The NEA/NI drilling campaign is expected to be integrated with a broader Abu Qir drilling campaign,
providing synergies on capital expenditure. Energean expects to drill an infill well in Q2 2022 to support
production in the Abu Qir concession. An additional three wells, currently under technical review, are
expected to be drilled following the NEA/NI drilling programme.
Exploration
On 3 January 2022, an international consortium led by Energean Egypt (50% operator and Croatia's INA,
d.d. 50%) was awarded an exploration licence for the East Bir El-Nus concession (Block-8), in the Western
Desert of Egypt. The award is in line with Energean's strategy to increase and diversify its presence in
Egypt and reinforces its commitment to the country.
The work programme for the licence includes a 180 linear km 2D seismic survey, a 200km2 3D seismic
survey plus two exploration wells, which are expected to target estimated resources (in place) of
approximately 100 MMboe.
Europe
Italy
Energean is the second largest oil and gas operator in Italy after Eni, with interests in more than 50
licences at 31 December 2021. In 2021, Energean signed agreements for the purchase of 100%
renewable electricity for its operated assets to deliver further reductions in Scope 1 and 2 emissions
Page 44 of 273
STRATEGIC REPORT
Production
Working interest production from Italy averaged 9.9 Kboe/d (41% gas), at the top end of guidance of
9.5-10 Kboe/d.
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.
Development
The Cassiopea project, in which Energean has a 40% non-operated equity stake, remains on track for
H1 2024, being 24.2% complete as of 31 December 2021. The field will deliver plateau working interest
production rates of approximately 60 MMsfcd from the middle of the decade, providing more than 30%
of the region's gas consumption. Upside exists within the surrounding area from potential satellite tie-
back options, including the Gemini and Centauro prospects.
In September 2021, ENI began construction of the gas treatment plant for the Cassiopea project
(Energean, 40% non-operated interest). In line with Energean's sustainability strategy, the project will,
according to ENI, have close to zero emissions and the installation of 1 MWp of photovoltaic solar panels
will allow the project to achieve carbon neutrality.
In October 2021, Energean (49%), alongside operator ENI, spudded a sidetrack from an existing
development well from the Calipso platform. Calipso is a gas field located in the northern Adriatic Sea
and the well was drilled by the Key Manhattan jack-up rig. The well was brought onstream in early January
2022 and is producing at rates of 4.6 MMscf/d.
New gas supply agreement ("GSA") signed with A2A
On 5 August 2021, Energean Italy and A2A S.p.A. entered into a new GSA for the delivery of gas
commencing 1 April 2022 (being the effective date of termination of Energean Italy's current GSA with
Edison SpA), until 30 September 2023. Under the agreement, Energean will sell its full entitlement
production to A2A, which agrees to purchase, take and pay for the quantities. For each of Energean's
concessions, gas will be delivered at the relevant entry point to the Italian gas network. The realised price
will be the day ahead, PSV (Italian hub) price net of entry costs to the Italian gas network, and has no
penalties or liquidated damages in case of over and under deliveries.
Hedging
In H2 2021, Energean took advantage of the strong market pricing and hedged 28% of its 2022 Italian
gas production, locking in an average PSV price of € 53.30/MWh.
Greece and Croatia
Production
In the 12 months to 31 December 2021, working interest production from Greece and Croatia averaged
1.3 Kboe/d (12% gas), slightly lower than the full year production guidance of 1.5 Kboe/d due to downtime
for scheduled maintenance and union dispute on the Prinos Assets in Greece.
Greece
Development
On 27 December 2021, the € 100 million funding package, backed by the Greek State, for the Epsilon and
Prinos area development was finalised. € 90.5 million was provided by the Black Sea Trade and
Development Bank ("BSTDB") and € 9.5 million directly by the Greek State. The tenor is seven and eight
years respectively with first repayment not due until 2027. The blended interest rate is 2%. This Facility is
non-recourse to the Group.
Following the signing of the funding package, Energean has recommenced work on the Epsilon
development which includes the completion of the Lamda platform, tie back to the existing Prinos
complex and completion of three wells which were pre-drilled in 2019. First oil from the Epsilon
development, which has 2P reserves and 2C resources of 53 MMboe in aggregate, is expected in
H1 2023.
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STRATEGIC REPORT
Exploration
Ioannina and Aitoloakarnania
Energean was awarded a 6-month extension of the 1st Exploration Phase by the Hellenic Hydrocarbon
Resource Management Authority (“HHRM”) for the Ioannina licence on October 3 2021. In September,
Repsol transferred its working interest and operatorship of the licence to Energean.
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%.
A 3D seismic campaign is scheduled to be carried out in winter 2022/23.
Carbon Capture and Storage Projects
Energean is committed to meeting its net-zero emissions target by 2050 and leading the Mediterranean
region’s energy transition. The Prinos CCS project proposal is to provide long-term storage for carbon
dioxide emissions captured from both local and more remote emitters. Energean estimates that the
Prinos subsurface volumes are sufficient to sequester up to 100 million tonnes of CO2.
In H1 2021, Energean submitted its CCS proposal to the Greek government, with a view to inclusion within
its recovery and resilience plan, projects within which will qualify to receive funding from the Recovery
and Resilience fund over the period 2021-26. In June 2021, the European Commission granted approval
for the inclusion of the Greek CCS project within the fund.
In H2 2021, Energean commenced pre-FEED for the Prinos CCS project. It is expected to complete by Q2
2022. In March 2022, Halliburton was awarded a service contract to assess the carbon storage potential
of the Prinos basin.
Croatia
Development
At end-December 2021, Energean was in FEED for the development of the Irena gas field. If progressed,
first gas is anticipated for Q4 2024. The field has 2P reserves of 0.4 Bcm (2.3 MMboe)51.
Montenegro
Exploration
Technical evaluation of Blocks 26 and 30 has been completed. Energean’s focus is on the significant
biogenic gas potential identified. The Ministry has agreed to extend the deadline of the first exploration
period in Montenegro by four months from the original expiration date of 15 March 2022 to facilitate the
obligated introduction of a partner.
51 YE21 D&M CPR.
Page 46 of 273
STRATEGIC REPORT
UK North Sea
Production
In the 12-months to 31 December 2021, production in the UK North Sea was 0.7 Kboe/d (16% gas), ahead
of full year guidance of 0.5 Kboe/d due to extended production from the Wenlock field.
Exploration and Appraisal
The two-well Glengorm appraisal programme, in which Energean has a 25% non-operated interest,
commenced in December 2020.
Drilling operations at the Glengorm South appraisal well were safely completed in April 2021. The well
contained no commercial hydrocarbons and the well was plugged and abandoned.
The Glengorm Central appraisal well spudded in May 2021. It contained no commercial hydrocarbons
and has been plugged and abandoned. A comprehensive data analysis program is underway. The results
of the Glengorm appraisal programme will be evaluated to inform forward plans for the P.2215 licence.
Isabella appraisal is expected to commence in 2022.
Commercial
Energean has received interest from third parties with respect to the potential sale of its UK assets
portfolio and is considering its options.
Page 47 of 273
Reserves
Energean’s year end 2021 working interest reserves52 are 965 MMboe, a 25% increase vs. 2020 and a 2% decrease53 on pro forma 2020, the latter which includes
the acquisition of Kerogen’s 219 MMboe. The increase in reserves versus 2020 was primarily due to the acquisition of Kerogen Capital’s 30% holding in Energean
Israel Limited (“EISL”), adding 219 MMboe.
At
1 January 202154
Revisions and
Discoveries
Acquisitions/
(Disposals)
Transfers from /
(to) contingent
Production
At
31 December 2021
STRATEGIC REPORT
Israel
Greece
Egypt
Italy
Oil
Gas
MMbbls
100
Bcf
3,472
Total
MMboe
730
Oil
Gas
MMbbls
Bcf
Total
MMboe
Oil
Gas
MMbbls
Bcf
Total
MMboe
52
6
53
14
567
114
Oil
Gas
MMbbls
36
Bcf
249
Total
MMboe
79
United
Kingdom
Oil
Gas
MMbbls
Bcf
Total
MMboe
Croatia
Oil
Gas
MMbbls
Bcf
13
2
2
2
-
1
65
13
2
(0)
2
1
11
3
1
7
2
(0)
2
1
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(14)
-
(14)
(0)
(17)
(3)
-
1
0
(0)
(3)
(1)
-
-
-
-
-
(0)
-
(0)
(1)
(52)
(11)
(2)
(9)
(4)
(0)
(0)
(0)
-
(0)
101
3,537
744
36
6
37
13
508
103
34.89
248
78
1
1
1
-
14
52 YE21 D&M and NSAI CPR.
53 When considering Energean 2021 2P reserves versus 2020 pro forma 2P reserves (Energean (including Edison) plus the acquisition of Kerogen’s 30% holding in EISL).
54 Pro forma Energean (includes Edison) plus the acquisition of Kerogen’s 30% holding in EISL.
Page 48 of 273
STRATEGIC REPORT
At
1 January 202154
Revisions and
Discoveries
Acquisitions/
(Disposals)
Transfers from /
(to) contingent
Production
At
31 December 2021
Total
Total
MMboe
Oil
Gas
MMbbls
Bcf
Total
MMboe
2
204
4,309
98155
0
5
87
21
Present Value of 2P Reserves56 ($ million)
Adjusted TopCo57 Group Net Debt YE21 ($ million)
7,040
103.6
-
-
-
-
-
(15)
(20)
(18)
(0)
(4)
(61)
(15)
2
187
4,315
965
55 Figure shown differs to the sum of the countries due to rounding.
56 YE21 D&M CPR’s High Case (based on forward curve).
57 The Group excluding Israel and Greece.
Page 49 of 273
STRATEGIC REPORT
Corporate Social Responsibility
Our approach
At Energean, we are dedicated to creating sustainable and lasting value for all our stakeholders, while
adhering to the highest standards of corporate social responsibility and maintaining the viability of our
business model. Guided by our policies, commitments and international best practice, we have
implemented several initiatives to make positive contributions to the environment and society. Notably,
among these:
• We have pledged to become a net-zero emitter by 2050 and are committed to setting science-based
targets to reduce our greenhouse gas emissions.
• We have aligned our reporting with the Task Force on Climate-Related Financial Disclosures (TCFD)
reporting recommendations, the guidelines of the Global Reporting Initiative (GRI) and the
Sustainability Accounting Standards Board (SASB).
• We have engaged with the Carbon Disclosure Project (CDP), the Maala Index and Sustainalytics, with
results placing us in the top quartile of ESG ratings.
• We are a signatory of the United Nations’ Global Compact (UNGC) and the Terra Carta, the Sustainable
Markets Initiative of His Royal Highness the Prince of Wales, and we are a contributor to the United
Nations Sustainable Development Goals (SDGs).
We value our employees as the key to our success. We are committed to creating an inclusive and
attractive workplace and adopt a proactive stance in safeguarding the health, safety and security of our
people. In order to bring together a unique workforce with different cultures and diverse backgrounds, we
frequently undertake initiatives where our people get to meet, bond over, and share their cultures, ideas
and perspectives.
In addition, we aim to build strong bonds and engage and add value to the communities in which we
operate. Our dynamic CSR program is specifically designed to support local communities through a wide
range of initiatives and actions, and maintain an open, bi-directional dialogue through transparent
communication channels.
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 205058. In 2021, we have delivered a year-on-year 8% reduction to carbon emissions intensity, when
considering 2021 performance versus pro forma performance on an equity share accounting approach.
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
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. We have designed our CSR Policy in accordance with internationally recognised
standards and industry best practice. 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 and
social responsibilities, whilst ensuring the trust of our stakeholders. In accordance with this and best
58 Scope 1 and 2 emissions.
Page 50 of 273
STRATEGIC REPORT
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 continue 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 comply 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 2010, 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. We actively
monitor and manage risks from bribery or ethical misconduct, and we run an anti-corruption and anti-
bribery compliance programme, actively overseen by the Board.
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 2021 CSR activities, alongside the respective SDGs that
they serve.
SDGs
Our commitments and actions
•
•
•
“Back to School” with Energean: we purchased and donated school supplies,
classroom equipment, and stationery to 3 social institutions, 1 organisation
and 3 schools, supporting over 500 students and their families in need – Kavala
& the Island of Thassos, Greece.
“Back to School” with Energean in Italy - in collaboration with “Caritas” (a
Catholic organisation for charity), we donated school supplies and stationery,
helping a Charity Center and 50 families & their children – Chieti Province, Italy.
“Back to school” with Energean in Egypt: 400 school bags were bought,
delivered, and donated by the Energean Team to children and young students
in need. Our colleagues purchased and donated school supplies, equipment,
and stationery to fill school bags – Meadia village, Egypt.
• Energean and AQP donated furniture to those in need. Energean donated office
furniture to the Dar Al Orman Association, while Energean’s joint venture, Abu
Qir Petroleum (AQP), supported the local community of Meadia Village by
donating school desks to Zainab Abdel Wahab Primary Azhari Institute - Egypt.
• Packed and donated 70 “Sweet Packages” (“Mishloach Manot”) to a women’s
shelter for the holiday of Purim ahead of the 2021 International Women’s Day -
Haifa, Israel.
• For the second year, donated 50 food packages to elderly and lonely people on
Passover Eve, in collaboration with the NGO “Lev Chash” (“Feeling Heart”) -
Haifa, Israel.
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• Offered 100 Super Market Gift Vouchers to our fellow citizens in need, for their
festive Easter Sunday Table, responding to the call of the Regional Unit of
Kavala. The gift vouchers were handed-over to the Holy Diocese of Philippi,
Neapolis and Thassos to strengthen its important social activities in the area –
Kavala, Greece.
• Supported underprivileged families during Ramadan, by donating 200 food
boxes to meet essential needs in Meadia, the Abu Qir operations site location
– Egypt.
• Donated 65 packages filled with food and products to families in need and the
elderly, on the Eve of Rosh Hashana (the Hebrew new year), in collaboration
with the NGO “Lev Chash” (“Feeling Heart”) – Haifa and its suburbs, Israel.
• Continued our excellent HSE performance with more than 11 million man-hours
with no Lost Time Injuries (LTI) in the construction of the Energean Power FPSO
in Singapore, and almost 1 million man-hours (without LTI) in all Energean sites.
• Maintained the ISO 45001 Health and Safety Management System certificates
in all our operated sites where they already exist and established it in the
remaining asset of Prinos in order to be certified in 2022.
• Donated health and medical supplies to the nursing and supporting personnel
of the state owned “Komanski Most”, a foundation that supports children, youth
and adults with moderate to severe mental or developmental disabilities –
Montenegro.
• Offered paid internships to 9 college students in Greece.
• On 5 June (World Environment Day), Energean aligned with the United Nations’
2021 theme “Ecosystem Restoration”, focused on positive actions and
increased environmental awareness:
• Greece:
▪ Organised an environmental webinar for our colleagues and Middle
School students & above titled “Our Planet’s Ecosystem Restoration”.
• Egypt:
▪ Hosted a webinar for our colleagues titled “Biodiversity
in the
Mediterranean”.
▪ Organised beach clean-up activities at Meadia Beach.
▪ Hosted sessions on beach preservation and environmental awareness.
▪ Renovated the Sports Club of the Village of Meadia.
Israel:
▪ Supported the production of educational videos for elementary school
•
students focusing on environmental preservation.
• Montenegro:
▪ Purchased and planted trees (Indian Lilacs) in the City of Bar.
• Awarded 4 Master’s degrees Clean Energy scholarships to students at the
University of Haifa and the Technion to reward excellence and promote
academic research on clean energy - Israel.
• Hosted a webinar for our colleagues on harassment and abuse, dealing with
the recovery process of harassment trauma and abuse and how one can face
challenges in day-to-day situations.
• On Holocaust Remembrance Day, Energean organised a live webinar with a
Holocaust survivor, in collaboration with the NGO “Living Room Memorial”
(“Zikaron BaSalon”) - Energean’s Haifa offices, Israel.
• Held a live awareness webinar titled “Mediterranean Biodiversity and Marine
Conservation”, by participating and joining in the launch of “The UN Decade of
Ecosystem Restoration” and reflecting Energean’s vision towards a sustainable
future.
• Hosted an open live discussion/webinar on Sustainability, titled: “Our People,
Our Planet: Energean’s ETHOS in action” between Energean’s CEO Mathios
Rigas and Professor David Grayson.
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• > Translated (in collaboration with Maala) the Executive Summary of the book
“All In”, in order to make it accessible to the Israeli community. The book is
written by Professor David Grayson, a world-renowned CSR expert and author.
• During 2021, the overall percentage of women at Energean increased for a
consecutive year from 15% to 18%. Board representation decreased to 30%
• Welcomed Katerina Sardi to Energean as Country Manager and Managing
Director of Energean Greece.
• Energean recycled 96% of water withdrawals in its production sites.
• Energean recognises the global demand and focus on providing cleaner
energy. Over 70% of our reserve base and annual production mix is gas
• Number of Employees: 604 as at 31 December 2021 (versus 620 as at 31
December 2020)
• Number of Nationalities: 24 as at 31 December 2021 (versus 19 as at 31
December 2020)
• Donated equipment that is important to blind and severely visually impaired
people in order to serve their daily needs, in collaboration with the non-
governmental and non-profit “Organisation of the Blind of Bar and Ulcinj” –
Montenegro,on White Cane Safety Day (October 15th).
• Supported and ran alongside the Muscular Dystrophy Association of Greece
(MDA Hellas) and patients in wheelchairs, by participating in the 38th Athens
Classic Marathon events for 2021 (5K & 10K races), with our CEO, Mathios
Rigas, leading our company’s running team. MDA Hellas is a non-profit
organisation that supports people that suffer with neuromuscular diseases.
• Donated to MDA Hellas for the operation of the Neuromuscular Diseases Unit
of the “AHEPA” University General Hospital (“AHEPA” Hospital) of Thessaloniki,
which will serve about 350 people in the coming year, children and adults - the
Unit covers the geographical area of all Northern Greece.
• Donated, in collaboration with Dar Al Orman Association, necessary equipment
(artificial/prosthetic limbs, wheelchairs, and hearing aids), covering the needs
of all underprivileged people with disabilities in Meadia village - Egypt.
• Supported “Fresh Start” to get back in the water: a group of 15 teenagers with
special needs in Israel, who participate in empowering activities, a combination
of sailing and educational sessions, focusing on teamwork and leadership
values.
• Supported (donation and sponsorship) the “Athletic Club of Kavala -
Department of Wheelchair Basketball”. In light of the team’s first ever
participation in a European Championship (EuroCup’s Preliminary Round), we
covered the fixed needs and expenses of the Department for the entire
Wheelchair Basketball Season 2021-22 - Kavala, Greece.
• Continued to support three Paralympic swimmers in Israel (Ilan Haifa
Swimming Sports Center) in their journey and their successful participation in
the Tokyo 2020 Paralympic Games via monthly financial aid and social media
awareness. Special grants were also offered to the swimmers for exceptional
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achievements in global competitions. Our company has proudly supported
these world champions for the last three years in a row.
• Continued the support to “Etgarim” for the third year, an NGO dedicated to the
empowerment and social integration of people with disabilities through
outdoor sports. This year Energean colleagues ran 5 and 8 kilometers in their
“Spring Run” delivering a message of inclusivity – Israel.
Installation of accessibility aids to ensure that visitors with disabilities enjoy
touristic sites that are toured by thousands of visitors every year - in
collaboration with Israel’s Nature and Parks’ Authority.
•
• Grand sponsor of the 21st “Trofeo Del Mare” (“The Trophy of the Sea”), the
International Maritime Awards 2021, performed in Marina di Ragusa – Italy.
• Restored the beach and renovated the Sports Club of the Village of Meadia –
Egypt.
• Continued the support to the Hof HaCarmel Regional Council in promoting
community and environmental projects - Israel.
• Continued the support to “Etgarim” - a Haifa Sailing Club that empowers people
with disabilities and youth with special needs through outdoor sports - Israel.
• Recycled 90.5% of the waste generated during 2021 in production sites.
• Maintained the ISO 14001 Environmental Management System certificates in
all our operated sites.
• Energean’s Egyptian Abu Qir Petroleum (AQP) joint venture (JV) partners
received their first certificate for waste segregation and paper recycling in
Egypt. AQP becomes the first Oil & Gas JV in Egypt to entirely (100%) recycle
its paper, cartons and plastic waste from all its offices and operational sites
(onshore and offshore). Energean’s Cairo branch has followed the same
approach of waste segregation and recycling, by cooperating with “Go Clean”,
a recycling solutions company – Egypt.
• Energean is taking meaningful actions to fulfil its commitment to become a
net-zero emitter by 2050.
• Energean’s strategy to Net-Zero emissions by 2050:
• Short-term plan – by 2025.
• Medium-term plan – by 2035.
• Long-term plan – by 2050.
Improved our Carbon Disclosure Project score to a B from a B-, regarding the
climate change questionnaire.
•
• Aligned our annual reporting to the TCFD recommendations.
• Successful roll out of ‘green electricity’ in Greece, Israel, Italy, and the EDINA
operative site in Croatia.
• Zero oil spills during 2021, while maintaining a completely clear record since
the beginning of our operations (2008)
• Joined the environmental effort of the Ministry of Environmental Protection in
cleaning the Israeli coastline after a leak from a tanker (not associated with
Energean). Energean deployed a team of professional cleaners to the coast of
Haifa’s suburbs for a 2-day clean-up activity, where 90 bags/600kg were
collected.
Implemented a series of sampling, measurements, laboratory analyses and
monitoring of biochemical parameters of the seawater and the seabed soil -
Prinos, South Kavala, Greece.
•
• Maintenance of Telemetric Stations in surface waters of Nestos River Delta,
Lakes Vistonida-Ismarida and Thassos
Island Management Body – Northeastern Greece.
•
• Donated 200 trees in the occasion of Tu BiShvat, “The New Year of the Trees
and Nature” celebration. The donation to the Israeli JNF (Jewish National Fund)
will contribute to the re-forestation of Nof-HaGalil (the Galilee View) forest in
Nazareth - Israel.
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• Restored the beach and organised beach clean-up activities at Meadia Beach
– Egypt.
• 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. Our latest collaboration, the support of a
project to make touristic sites accessible to people with disabilities.
Energean collaborated with:
• UN Global Compact.
• UN Global Working Group participation.
• Maala, a non-profit, CSR standards-setting organisation in Israel, which has set
a dedicated CSR index on Tel Aviv Stock Exchange. Maala’s CSR Index is an
ESG rating system used as an assessment tool, benchmarking Israeli
companies on their CSR performance. Energean was rated at Gold Level, for a
second year in a row, at the 2021 Maala ESG Index – Israel.
• Management body of the Nestos River Delta, Lakes Vistonida-Ismarida and
Thassos Island – Northeastern Greece.
“Caritas Diocesana”, a Catholic organisation for charity - Chieti Province, Italy.
“Go Clean”, a recycling solutions company – Egypt.
• The Greek Embassy – Podgorica, Montenegro.
•
•
• The Jewish National Fund (JNF) – Israel.
• The Regional Unit of Kavala - Greece.
• The Municipality of Bar – City of Bar, Montenegro.
• The Italian Naval League.
• The American University of Cairo – Egypt.
•
•
•
“Etgarim”, an NGO dedicated to the empowerment and social integration of
people with disabilities through outdoor sports - Haifa, Israel.
“Athletic Club of Kavala - Department of Wheelchair Basketball” - Kavala,
Greece.
“Organisation of the Blind of Bar and Ulcinj”, a non-governmental and non-profit
organisation which aims at bringing together blind and severely visually
impaired people - Montenegro.
• The Nature and Parks Authority – Israel.
• The Holy Diocese of Philippi, Neapolis and Thassos - Northeastern Greece.
• Zainab Abdel Wahab Primary Azhari Institute - Egypt.
•
• Democritus University of Thrace (DUTH), Department of Environmental
Israeli Paralympic Committee.
Engineering – Xanthi, Greece.
• Dar Al Orman Association – Meadia village, Egypt.
•
“Living Room Memorial” (Zikaron BaSalon), a Holocaust Remembrance NGO -
Israel.
“Together for Children”, an association of NGOs in the field of child welfare -
Athens, Greece.
•
• The University of Haifa and the Technion - Israel.
• Association of Paraplegics and Disabled people of the Ileia Prefecture,
Southwestern Greece.
“Lev Chash” (“Feeling Heart”), a local NGO in Haifa, Israel.
•
• MDA Hellas (the Muscular Dystrophy Association of Greece), a non-profit
that suffer with neuromuscular
organisation
diseases – Greece.
“Fresh Start” a group of teenagers with special needs, who participate in
empowering activities, a combination of sailing and educational sessions,
focusing on teamwork and leadership values – Israel.
that supports people
•
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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.
2021 was a year of significant growth for Energean and our people, with the integration of Edison E&P
and the Karish development sharing the central stage. We expanded our presence in Italy, Egypt, Croatia,
and the UK, welcomed more than 250 colleagues to the team and opened new offices in Milan for our
Italian business, which will also accommodate the technical centre of excellence.
This growth fundamentally reshaped our people structure, systems, processes. We aimed to maintain a
positive and collaborative work environment to enable our people to fulfil their potential, despite the
challenges that the ongoing COVID pandemic continued to pose.
One of the core challenges after the completion of the Edison E&P acquisition was to finalise the new
organisation structure to enable the fulfilment of our corporate growth strategy. The new structure that
was introduced in December 2020 allowed local business units greater autonomy, whilst still receiving
support from the various group functions who can allocate their resources according to the
company needs.
In parallel, we ran the implementation of the SAP SuccessFactors suite, a market leader in HR software.
This has created a unified cloud-based platform for employees to facilitate HR activities, such as
recruitment and onboarding, learning and development and performance management. The suite has
been launched in three stages with the central database and recruiting module being launched first at
the beginning of July 2021, the learning platform in September and onboarding and performance
management in December. SAP SuccessFactors, alongside the Energean Intranet ETHOS has allowed
our people, especially those who joined Energean through the acquisition of Edison E&P, to develop a
deeper understanding of people, processes, and culture.
Talent acquisition and management
The new organisation structure created unique opportunities for new and existing employees to further
develop their career, as new roles were created across most functions in 2021.
We used the SAP SuccessFactors suite and collaborated with specialist organisations to drive successful
talent acquisition. In December 2021, we also launched internal and external career sites on our intranet
and website to improve the overall candidate experience and facilitate a more transparent talent
acquisition process. This also provided external candidates with the opportunity to understand the
company culture, benefits and details on the application process.
In parallel with the career site, we launched an onboarding platform where new employees can review all
HR and Compliance policies, receive an internal mentor and familiarise themselves with the
Energean culture.
For another year, we invested in developing the leaders of the future by offering academic scholarships,
internships for graduates and undergraduates as well as external professional training opportunities for
our existing staff.
Performance management
Following the Energean Voice Survey in 2020, an action plan was set for 2021 to address some of the
key topics identified by the engagement survey. We carefully realigned our performance management
process and policy and introduced a new competencies framework to provide a guide to our people about
the behaviours that are underpinned by our values.
For the first time, we introduced a continuous performance and feedback mechanism to enable our
people to get real-time feedback and guidance to build their strengths, develop their career and together
shape the Energean of the future.
Additionally, we introduced the group role profiling and group grading structure. Through role profiling
we are able to systematically identify the skills, qualifications, and the accountabilities of the different
roles in the organisation. Role profiling allowed for the smoother integration of our new colleagues within
the Energean structure and for better understanding of the impact their role has within the organisation.
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This will further assist our people to set clear career paths from one role to another within Energean. The
grading system in conjunction with performance management, skill assessments and training allows us
to make more reliable and transparent decisions about hiring, promotion, and leadership development.
Employee wellbeing
We strive to uphold a positive, open and honest culture to enable our people to fulfil their potential. For
another year, COVID-19 lockdowns continued to challenge us and the way we work and interact with each
other. Our employees’ welfare during this challenging period was even more important. As a result, early
in 2021 we introduced a global Employee Assistance Program offering professional support to address
any personal challenges affecting their well-being.
We sought to promote other teambuilding activities, including online cooking, running for charitable
causes, as well as hosting a variety of workshops and webinars. We also ensured that all our employees
groupwide were covered with private medical insurance.
Employee engagement
We engage with our people through regular team meetings, messages from the CEO and through our
intranet. We aim to have an open culture where people can contribute towards our success.
The integration with Edison E&P triggered the need to reshape not only our organisation but also our
culture. In 2021, we designed a culture survey to understand how people perceive our culture and redefine
the way we behave, work, and interact with each other to meet the needs of our multicultural group. The
process will launch in early 2022 and the aim is to analyse the results and define the new Energean culture
of tomorrow within the year.
We respect the rights of all employees to join a legitimate trade union and bargain collectively - we have
collective bargaining agreements in place. Robert Peck is the representative of the employees on the
Board – as position he has held since 2019.
Diversity and inclusion
Our current and future success depends on a diverse range of talented people. We aim to treat everyone
fairly, equally, and without prejudice, irrespective of gender, race, nationality, age, disability, sexual
orientation, or any other discriminatory attributes. In 2021, we continued to participate in the D&I
workgroups organised by the UN Compact Global Network UK.
During 2021, we increased the overall percentage of women at Energean for a second consecutive year
from 15% to 18% and we have a healthy mix of employees from three different generations. Board
representation decreased slightly from 33% to 30%, as a result of the increase in the number of Board
members from 9 to 10 people in 2021 (the number of women stayed flat y-o-y).
In 2021, for the first time, we have reported the gender pay gap. Energean has a gap of (18)% at median
hourly wage rates.
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 90.6% despite a decrease of 7.6% compared to 2020.
The retention was affected largely by retirements, following the integration of Edison E&P with Energean.
Headcount by seniority and gender
Gender balance by seniority
Male
Female
Total
Board
Executive Committee
Senior Management
Middle Management
7
8
16
35
3
5
6
9
10
13
22
44
Rest of staff
432
83
515
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Gender balance by seniority
Board of Directors
70%
Executive Committee
62%
Senior Management
73%
Middle Management
Other Employees
80%
84%
30%
38%
27%
20%
16%
0%
20%
40%
60%
80%
100%
Male
Female
Headcount by age
Category
Number
% vs. total no.
of employees
2021
2020
2021
2020
Up to 30 years old
33
31 to 50 years old
Over 51 years old
393
178
178
5%
65%
29%
6%
63%
31%
37
392
191
33
393
Up to 30 years old
31 to 50 years old
Over 51 years old
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Headcount by seniority and age range
Board of Directors
10%
90%
Executive Committee
23%
77%
Senior Management
59%
41%
Middle Management
68%
Other Employees
6%
67%
32%
26%
0%
20%
40%
60%
80%
100%
< 30 years old
30 - 50 years old
> 50 years old
Headcount by country
At the end of 2021 our workforce decreased from 620 employees to 604, representing 24 different
nationalities. The Edison acquisition brought over 250 employees to Energean in 2020.
Country
No of employees59
Greece
UK
Montenegro
Cyprus
Israel
Egypt
Italy
Croatia
Total
2021
295
27
2
5
41
42
183
1
620
2020
313
29
2
6
30
60
176
4
604
59 Excludes JV partners.
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Employees per country
Croatia
Montenegro
1
2
Cyprus
5
UK
27
41
42
Israel
Egypt
Italy
Greece
183
295
0
50
100
150
200
250
300
350
Providing a safe working environment
Protecting the health and safety of all individuals affected by our corporate activities is our top priority.
In 2021, we improved our safety performance compared to 2020 via a cultural shift away from discipline-
driven to commitment-based compliance. This enabled us to effectively tackle COVID-19 issues and
manage the long-term viability of our business.
Key HSE metrics
LTIF60
Employees
Contractors
Personnel total
TRIR61
Employees
Contractors
Personnel total
FAR62
Employees
Contractors
Personnel total
2021
0.98
0.25
0.33
2021
1.97
0.62
0.77
Pro forma 2020
2020
0.00
0.72
0.63
0.00
0.73
0.65
Pro forma 2020
2020
0
1.20
1.05
0
1.46
1.31
2019
0.00
0.29
0.28
2019
0
0.88
0.84
2021
Pro forma 2020
2020
2019
0
0
0
0
0
0
0
0
0
0
0
0
60 LTI Frequency: The number of Lost Time Injuries (fatalities +LTIs) per million hours worked.
61 TRIR: The number of Total Recordable Injuries (fatalities + LTIs+ restricted work cases + medical treatment cases).
62 FAR: The number of fatalities per 100 million hours worked.
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Humanising our HSE management system
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.
Shifting our HSE approach from rule-dominated requirements to a more interactive human-focused
approach, highly contributed to improving the effectiveness of our HSE Management System.
Encouraging personnel interest in safety and creating open dialogues on improving workflows has
increased staff safety performance and improved the HSE Management System.
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.
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
•
• Prevent events escalation that could potentially affect stakeholders and Energean
•
Identify opportunities for improvement.
In 2021, we reached 2.5 million man-hours free of Lost Time Injuries (LTIs) at all Energean sites, and 15
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.
Energean’s Board approved Corporate Major Accident Prevention policy (CMAPP) 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
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•
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
•
Its commitment to achieve the highest standards of HSE performance
• The importance of the HSE Management System and its effectiveness.
During 2021, 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 2021, more than 230 Senior Management visits and site walk-arounds were performed at
Energean’s operated sites and for the FPSO project in Singapore.
Crisis Management Plan (CMP)
Energean’s Crisis Management Plan (CMP) covers all assets and operations, and is formally tested to
ensure it meets all requirements at the strategic, incident management and response level. Early
identification of a potential crisis and immediate action in the event of a crisis, provides the necessary
management assurance for:
• Protecting human lives
• Protecting the environment
• Protecting tangible and intangible assets
• Ensuring business continuity and sustainable development
• Protecting the Company’s reputation.
During 2021, more than 275 drills and exercises were performed at operated sites and for the
construction and development of the Energean Power FPSO.
Legal and regulatory compliance
Compliance with all applicable HSE legislation and regulations is a fundamental requirement of
Energean’s HSE Management System. Energean conducts its operations at all workplaces in accordance
with the corresponding local laws and regulations, and European and international standards.
During 2021, more than 720 HSE audits were performed on operated sites and for the construction and
development of the Energean Power FPSO. Of this, 680 audits were in relation to the FPSO in Singapore.
Competence management and training
Energean maintains an ongoing competence and assurance management scheme and provides an
adequate level of HSE training. All Energean personnel, are suitably trained to meet the standards set by
the Statutory Bodies and the Company’s requirements. This ensures the ongoing development of a
competent workforce which, in the long term, benefits both individuals and Energean.
During 2021, all employees participated in internal HSE training sessions. Moreover, dedicated teams
participated in external certified training according to ongoing needs. More than 1,700 training hours
were provided to personnel working in Energean sites, while more than 4,800 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.
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STRATEGIC REPORT
During 2021, more than 40 contractors were evaluated against this HSE criteria, both before and after
the completion of their work, and were deemed to have performed their operations in an appropriate
manner.
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 2021, 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.
For the second consecutive year, Sembcorp Marine’s Admiralty Yard was awarded a Safety and Health
Award Recognition for Projects for Safety Excellence for Energean's Karish Project. At the end of 2021,
the project completed 15 million-man hours with no LTIs in Singapore.
Our COVID-19 response
Throughout 2021, the COVID-19 pandemic continued to impact countries around the world, spurring new
lockdowns and business disruptions. As a result of this, Energean’s number one priority was 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 (more than 50% of office
workers worked from home in 2021) 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
•
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 2021. The infected cases constitute 10% of our workforce (up from 3% in 2020). All infected
employees have fully recovered and returned to their duties.
10%
Infected Cases
Total Employees
Page 63 of 273
STRATEGIC REPORT
Our Health and Safety performance in numbers
Occupational safety
2021
Pro forma
2020
2020
2019
Employees man hours worked
1,015,866 1,130,183 650,405
708,080
Contractors man hours worked
8,118,433 8,362,784 5,466,939
13,594,566
Total man hours worked
9,134,309 9,492,967 6,117,344
14,302,646
0
0
0
0
0
1
2
3
0.98
0.25
0.33
2
5
7
1.97
0.62
0.77
2021
0
0
2021
950
1,401
2,351
0
0
0
0
0
0
6
6
0
0.72
0.63
0
10
10
0
1.20
1.05
0
0
0
0
0
0
4
4
0
0.73
0.65
0
8
8
0
1.46
1.31
0
0
0
0
0
0
4
4
0
0.29
0.28
0
12
12
0
0.88
0.84
Pro forma
2020
2020
2019
0
0
0
0
1
0
Pro forma
2020
3,366
561
3,927
2020
2,743
183
2,926
2019
2,273
1,631
3,904
Number of Employees Fatalities
Number of Contractors Fatalities
Employees Fatal Accident Rate (FAR)63
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)64
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)65
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)
63 Per 100 million hours worked.
64 Per 1 million hours worked.
65 Per 1 million hours worked.
Page 64 of 273
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
Equity share versus operational accounting approach
In this report, we have updated our environmental metrics / GHG emissions reporting to align with
industry standards. As a result, we now report emissions based on an equity share accounting approach
and also on the operational accounting approach. All other environmental data is recorded based on the
operational accounting approach. The historical data has been updated and included in this year’s
report accordingly.
The definition of equity share is Energean’s working interest across both operated and non-operated
sites. For example, this accounting measure would include 10.47% of the total gross emissions from
Scott, UK, which we hold a 10.47% non-operated working interest in.
In comparison, the operational approach does not take into account Energean’s working interest — it
includes the gross (i.e. 100%) project emissions only for assets that Energean operates. For example,
this approach does not include any emissions from the UK, as we hold no operated positions, and
includes 100% of emissions from Accettura, Italy, even though our working interest in the field is 50.33%.
Environmental KPIs
Environmental expenditure $ million67
Energy consumption intensity (MJ/boe)68
– operated share
Scope 1&2 carbon emissions intensity
(kgCO2e/boe)69 – net equity share
Water use intensity (m3/boe)70
– operated share
Water volume recycled (%)71
– operated share
2021
1.1
383.2
18.3
0.2
95
Pro forma
202066
202066
4.6
0.4
2019
1.4
516.2
1,099.8
744.2
19.8
37.9
66.8
0.1
0.4
0.9
92
92
89
66 Energean has updated its reporting approach for environmental metrics. As a result, 2020 figures are different to those reported
in the 2020 Annual Report but 2019 figures are the same. Please see the explanation of the new equity share versus operational
approach on page 65.
67 Capital expenditures related to environmental protection activities.
68 Ratio of energy (thermal & electrical) consumption over gross hydrocarbons production.
69 Ratio of direct and indirect (consumed electricity) carbon emissions over gross hydrocarbons production.
70 Ratio of total fresh and seawater used for processes over gross hydrocarbons production.
71 Proportion of water used in the process that is returned to the same catchment area or the sea, from where is was
initially drawn.
Page 65 of 273
Environmental KPIs
Non- hazardous waste intensity (kg/boe)72
– operated share
Hazardous waste intensity (kg/boe)73
– operated share
Waste recycled (%)74 – operated share
Waste energy recovery (%)75
– operated share
2021
0.2
0.1
90.5
0.0
STRATEGIC REPORT
Pro forma
202066
202066
0.5
0.6
52.1
2.0
0.6
1.2
90.4
3.9
2019
0.7
2.3
96
0.0
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 2021, the total amount of nitrous and sulfurous emissions (NOx and SO2) generated across the
Group increased by 33% and decreased by 26% respectively, versus 2020 pro forma performance. The
increase in NOx was caused by increased fuel gas consumption at the FSOs in Italy. The reduction in SO2
was due to lower quantities of sulphur production at Prinos, Greece.
Also in 2021, we assessed opportunities to establish 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 and proposes performance optimisation ideas as well as working on energy
efficiency projects.
In 2021, 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.
Biodiversity
We are continuously looking at opportunities to protect and conserve the biodiversity in the areas in which
we operate.
During 2021, we performed a number of biodiversity surveys to identify sensitive habitats and assess the
impact of our operations, including:
• An offshore sampling analysis at Prinos in Greece. The results of the independent laboratory showed
that benthic communities have not been affected by our operations in the Gulf of Kavala.
• A pre- and post-dredging activities biological survey nearshore Dor Israel. The results of the two
surveys do not indicate any clear evidence of anthropogenic negative influence on the study area or
any signs of ecological stress at the Kurkar (rock type of which lithified sea sand dunes consist)
ridge habitat.
• Post drilling ecological survey at Karish Main Israel. The impact of the drilling operations on the marine
environment was found to be limited.
• Environmental baseline surveys at offshore Blocks 23, 31 and Karish Main 4 well area, Israel. No
sensitive habitats were identified in the study area.
72 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.
73 Ratio of municipal and industrial waste, that according to regulation pose a severe threat to human health or the environment
over gross hydrocarbons production.
74 Proportion of waste that are reprocessed into other products, materials or substances whether for the original use or for
other purposes.
75 Proportion of non-recyclable waste materials that are converted into usable heat, electricity or fuel through a variety
of processes.
Page 66 of 273
STRATEGIC REPORT
• An invasive species survey and treatment at the onshore valve station area, Israel. Invasive species
were found in the carob trees restored area. Treatment to remove invasive species commenced and
is still in progress.
We also continued supporting the Management Body of Nestos River Delta, Lakes Vistonida-Ismarida
and Thassos, to maintain the biodiversity monitoring telemetric stations, in northeastern Greece.
Additionally, Energean continued to collaborate with the Democritus University of Thrace to host the
Odyssea Platform (an innovative monitoring marine data system) at Prinos. The oceanographic data
retrieved by the Odyssea platform enhances the accuracy of marine simulations and forecasts, providing
relevant
local fishermen and
other professionals.
information about the open sea and coastal zone areas to
Research published in early 2022 by the International Hellenic University has confirmed that the wetland
of the River Nestosin Eastern Macedonia, Greece is entirely free of any traces of hydrocarbons. The
wetlands are adjacent to the hydrocarbon production and processing sites at Prinos, Kavala and the
onshore processing and storage facilities of Nea Karvali, both of which are managed and operated by
Energean. The survey was carried out by the International Hellenic University, conducted in collaboration
with the Dunarea de Jos din Galati University of Romania, under the framework of the European Union-
funded project "MONITOX – Common Bankers, Common Solutions”
Figure 7. Biodiversity analysis results in the Gulf of Kavala Greece
Water resources
Fresh water management is a high priority for Energean. We recognise the importance of freshwater
availability,
increased future global demands, high-quality standards requirements as well as
stakeholders’ expectations.
In 2021, 95% of water withdrawals were recycled. Our onshore and offshore water discharges are
continuously monitored by both automatic and manual analytical means to meet all relevant
regulatory limits.
Page 67 of 273
Total recycled water %
STRATEGIC REPORT
89
92
95
100
90
80
70
60
50
40
30
20
10
0
2019
2020
2021
Oil spills prevention
Energean has established a robust and well-tested oil spill prevention management system. As a result,
in 2021 we achieved another consecutive year with zero oil spills. Oil spill emergency response drills and
training take place on an annual basis to maintain a high level of equipment availability and personnel
preparedness. Furthermore, we are associate members of Oil Spill Response Limited, an industry
consortium that is a world leader oil spill response provider.
Waste management
At Energean, we maintain a strong code of ethics regarding discharges and waste, by enforcing waste
recycling and energy recovery activities.
In 2021, 91% of total waste was recycled and 9% was disposed at local landfill facilities.
100
90
80
70
60
50
40
30
20
10
0
4
96
6
4
90
9
91
46
2
52
2019
2020
2020**
2021
Waste Recycled (%)
Waste energy recovery (%)
Waste to landfill (%)
Page 68 of 273
STRATEGIC REPORT
Our environmental performance in numbers
Energean has updated its environmental metrics / GHG emissions reporting to align with industry
standards. For more information, please refer to page 65.
Environmental records
2021
Pro forma 2020
2020
2019
Production – equity share
Oil (Kboe)
Raw Gas (Kboe)
Total oil and raw gas
(Kboe)
4,141
11,489
15,629
Ratio oil/total (%)
Ratio gas/total (%)
26.5
73.5
Production – operated sites
Oil (Kboe)
Raw Gas (Kboe)
Total oil and raw gas
(Kboe)
Ratio oil/total (%)
Ratio gas/total (%)
2,506
449.0
2,955
84.8
15.2
GHG emissions – equity share
4,512
14,308
18,820
24.0
76.0
2,189
336.1
2,525
86.7
13.3
798.4
595.1
1,395
57.3
42.7
722.0
51.8
773.8
93.3
6.7
1,209
53.8
1,263
95.7
4.3
1,209
53.8
1,263
95.7
4.3
306,930
403,872
84,480
84,260
285,362
367,293
52,586
47,692
21,568
36,579
31,894
36,568
N/A
19.5
0.3
19.8
N/A
37.7
0.2
37.9
N/A
37.8
29.0
66.8
Total GHG emissions
(tCO2e)
Scope 1 emissions
(tCO2e)
Scope 2 emissions
(tCO2e)
Scope 3 emissions
(tCO2e)76
Scope 1 emissions
intensity (kgCO2e/boe)
N/A
18.3
Scope 2 emissions
intensity (kgCO2e/boe)
0.1
Total emissions
intensity (kgCO2e/boe)
18.3
GHG emissions – operated sites
Total GHG emissions
(tCO2e)
Scope 1 emissions
(tCO2e)
Scope 2 emissions
(tCO2e)
73,042
95,435
73,479
84,260
52,259
58,975
41,660
47,692
20,783
36,460
31,819
36,568
76 To be disclosed in the Q2 2022 CDP climate change questionnaire.
Page 69 of 273
Environmental records
2021
Pro forma 2020
2020
2019
STRATEGIC REPORT
***
1,488,772
1,488,772
872,615
(20,725)
(31,542)
(31,542)
N/A
Scope 3 emissions
(tCO2e)76
Guarantees of Origin
(tCO2e)
I-REC (tCO2e)
Scope 1 emissions
intensity (kgCO2e/boe)
Scope 2 emissions
intensity (kgCO2e/boe)
Total emissions
intensity (kgCO2e/boe)
UK Only – equity share
Total GHG emissions
(tCO2e)
Scope 1 emissions
(tCO2e)
Scope 2 emissions
(tCO2e)77
(58.0)
17.7
0.0
17.7
(73.0)
37.8
1.9
39.7
23,707
66,905
23,707
66,905
-
-
83.4
(73.0)
53.8
0.3
54.1
1,725
1,725
-
83.4
N/A
37.8
29.0
66.8
-
-
-
-
-
Total emissions
intensity (kgCO2e/boe)
83.4
Energy consumption
used to calculate above
emissions (kWh)
77,000
127,000
20,000
Other air emissions – operated sites
NOx (tonnes)
SO2 (tonnes)
VOC (tonnes)
233.8
711.8
9.0
Water usage – operated sites
156.1
900.2
11.8
35.4
875.1
11.8
30.6
1,437
16.5
Fresh water (m3)
103,784
88,556
88,501
112,045
Seawater (m3)
17,413,502
11,173,563
8,589,344
9,234,113
Total water usage (m3) 17,517,286
11,262,119
8,677,846
9,346,158
Recycled water (m3)
16,944,782
10,938,482
8,354,263
8,363,527
Recycled water (%)
Dispersed oil
concentration in
discharged
water (mg/L)
95.2
0.4
91.6
3.4
92.4
3.4
89.0
3.7
Water quantities disposal – operated sites
Non-hazardous waste
(tonnes)
675.9
1,209
490.7
907.0
77 Electricity is purchased by the building owner and thus taken into scope 3 emissions consideration.
Page 70 of 273
STRATEGIC REPORT
Environmental records
2021
Pro forma 2020
2020
Non-hazardous waste
intensity (kg/boe)
0.2
0.5
0.6
2019
0.7
Hazardous waste
(tonnes)
Hazardous waste
intensity (kg/boe)
Total waste recycled
(%)
Total waste energy
recovery (%)
Spills – operated sites
341.7
1,457
907.9
2,892
0.1
90.5
0.0
0.6
52.1
2.0
1.2
90.4
3.9
2.3
96.0
0.0
Hydrocarbon spills
0.0
0.0
0.0
0.0
Flaring (non-routine) – operated sites
Total hydrocarbons
flared (tonnes)
Flaring intensity
(kg/boe)
412.8
726.9
536.6
640.0
0.1
0.3
0.7
0.6
Energy consumption – operated sites
Total energy
consumption (kWh)
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)
314,517,104
362,088,369
236,401,631
261,038,889
200.2
67.8
276.7
109.6
211.2
208.4
273.0
165.1
932.0
1,027
639.8
731.3
315.4
406.6
826.8
579.1
383.2
516.2
1,100
744.2
Page 71 of 273
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 2021.
2021 was the first year of our transition to become the leading independent gas-producer in the
Mediterranean after the completion of the acquisition of Edison E&P 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 2020 pro
forma figures in order to represent meaningful comparative figures had the Edison Acquisition been
completed on 1 January 2020.
The Edison E&P acquisition helped us diversify our asset base and expanded our low cost production
stream across the Eastern Mediterranean. The Edison E&P acquisition added the key asset of Abu Qir
gas-concentrate field (“Abu Qir”) to our portfolio. Working interest production from Abu Qir averaged
29.1 kboed (87% gas) during 2021, which accounts for 70% of our total output for the year ended
31 December 2021.
Looking ahead to 2022, 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.
Financial results summary
Average working interest
production (Kboepd)
Sales revenue ($m)
Cash cost of production ($m)
Cost of production ($/boe)
Administrative & selling expenses ($m)
Operating profit/(loss) ($m)
Adjusted EBITDAX ($m)
Loss after tax ($m)
2021
41.0
497.0
261.6
17.5
43.0
32.1
212.1
(96.2)
Cash flow from operating activities ($m)
132.5
Capital expenditure ($m)
Cash capital expenditure ($m)
407.9
452.2
Pro forma
2020
48.3
335.9
198.9
11.3
41.4
2020
3.6
28.0
28.5
21.4
15.3
Change
from 2020
pro forma
(15.1%)
48.0%
31.5%
54.9%
3.8%
(422.2)
(124.5)
107.6%
107.7
(416.4)
137.0
565.4
550.8
(8.3)
(92.9)
1.5
429.0
419.0
96.9%
74.1%
(2.8%)
(27.8%)
(17.9%)
Net debt ($m)
Net debt/equity (%)
2,016.6
1,240.1
1,240.1
62.6%
285.8
103.8
103.8
175.3%
Revenue, production, and commodity prices
Sales revenue increased by $469 million ($161.1 million or 48.0%, on a pro forma basis to account for
the Edison E&P acquisition) to $497.0 million primarily as a result of higher realised commodity prices
and an increase in production volumes for both liquids and gas, due to the Edison E&P acquisition. Our
Page 72 of 273
STRATEGIC REPORT
pro forma revenue increase was driven primarily by commodity price strong recovery. The Group’s
realised oil and gas price for the period was $57.1/bbl and $5.2 $/mcf respectively.
Working interest production averaged 41.0 kboepd in 2021 (2020: 3.6 kboepd or 48.3 kboepd on a
proforma basis), with the Abu Qir gas-condensate field, offshore Egypt, accounting for over 70% of total
output. The decrease in pro forma production was driven primarily by a decrease in production from Abu
Qir and UK fields partially offset by the increase of the working interest in the Vega and Rospo fields
in Italy.
EBITDAX amounted to $212.1 million (2020: $(8.3) million or $107.7 million on a pro forma basis). The
increase from 2020 proforma EBITDAX was due to higher revenue partially offset by higher operating
costs from the enlarged group.
Cash cost of production
Cash production costs for the period were $17.5 /boe (2020: $21.4 /boe or $11.3/boe on a pro forma
basis). The increase in pro forma cash unit production cost was primarily driven by decreased production
and additional planned maintenance during extended summer shut-downs deferred from 2020 as a
result of COVID-19. Additionally, production costs were also impacted by the strengthening of Euro
against the US Dollar during the period.
Depreciation, impairments and write-offs
Depreciation charges before impairment on production and development assets increased by 303.9% to
$97.5 million (2020: $24.1 million or $166.3 million on a pro forma basis) due to higher DD&A charges on
acquired Edison E&P assets. Depreciation unit expense was $6.5/boe (2020: $18.4/boe or $9.4/boe on a
pro forma basis).
The Group recognised a pre-tax impairment charge of $65.3 million in 2020 for the Prinos CGU as a result
of a reduction in both short-term (Brent forward curve) and long-term price assumptions and a change
in the production forecasts for the Prinos field. There were no such impairments for the year ended 31
December 2021
Exploration and evaluation expenditure and new ventures
During the period the Group expensed $87.7 million (2020: $4.4 million or $164.6 million on a pro forma
basis) for exploration and new ventures evaluation activities. This includes costs ($79.8 million)
associated with exploration and appraisal activities write-off for Glengorm South and Glengorm Central.
In 2021 two appraisal wells were drilled targeting the Glengorm South and Glengorm Central segments.
Both wells were unsuccessful and did not find hydrocarbons. All wells have been plugged and
abandoned. The remainder of the impairment is as a result of the increase to the decommissioning
estimate in Italy.
In addition, new ventures evaluation expenditure amounted to $5.6 million (2020: $1.5 million), mainly
related to pre-licence and time-writing costs.
Selling, general and administrative (SG&A) expenses
Energean incurred SG&A costs of approximately $43.0 million in 2021 (2020: $15.3 million or $41.4
million on a pro forma basis). The increase is primary driven from the additional staffing and
administrative costs associated with the new acquired Edison E&P business. Cash SG&A was $34.8
million (2020: $11.7 million or $35.5 million on a pro forma basis).
Net other income
Net other income of $10.9 million in 2021 (2020: $19.1 million expenses) includes $6.8 million of income
due to a decrease in estimates of decommissioning provisions for certain UK producing assets,
representing the amount of the decrease that was in excess of their book value.
Unrealised loss on derivatives
The Group has recognised unrealised loss on derivative instruments of $21.5 million related to the
Cassiopea contingent consideration. A contingent consideration of up to $100.0 million is payable and
determined on the basis of future gas prices (PSV) recorded at the time of the commissioning of the field,
which is expected in 2024.
Page 73 of 273
STRATEGIC REPORT
As at 31 December 2021, the two year future curve of PSV prices increased from the date of acquisition
and indicate an average price in excess of €20/Mwh. The fair value of the Contingent Consideration as
at 31 December 2021 was estimated to be $78.5 million based on a Monte Carlo simulation
(31 December 2020: $55.2 million).
Net financing costs
Financing costs before capitalisation for the period were $278.4 million (2020: $102.7 million). including
$107.0 million of interest expenses incurred on Senior Secured notes (2020: nil), $96.7 million on debt
facilities (2020: $90.0 million) and $4.1 million (2020: $6.7 million) of interest expenses relating to long-
term payables, representing future payments to the previous Karish & Tanin licence holders. Finance
costs include mainly: unwinding of discount on deferred consideration, decommissioning provisions and
other liabilities of $27.7 million (2020: $1.2 million); expensing of the unamortised costs under Greek and
Egypt RBL of $18.1 million, due to repayments prior to their maturity dates and arrangement fees,
commissions for guarantees and other bank charges of $17.8 million (2020: $4.8 million).
Net finance costs includes foreign exchange losses of $6.9 million (2020: $15.4 million foreign exchange
gain). Finance income amounted to $3.0 million (2020: $0.5 million), including Interest income from
time deposits.
Taxation
Energean recorded tax charges of $5.4 million in 2021 (2020: $20.5 million tax credit), split between a
current and prior year tax expense of $44.5 million (2020: $0.8 million), and a deferred tax credit of $39.2
million (2020: credit $21.5 million) and representing an effective rate of 6% (2020: -18%).
Operating cash flow
Cash from operations before tax and movements in working capital was $136.7 million (2020: ($25.5)
million). After adjusting for tax and working capital movements, cash from operations was $132.5 million
(2020: $1.5 million or $137.0 million on a pro forma basis). The decrease on a pro forma basis was
primarily driven by payments made for buyers compensation in Israel amounting to $23.0 million and
cash held on account in relation to the commodity hedges in Italy of $29.4 million.
Capital Expenditures
During the period, the Group incurred capital expenditures of $407.9 million (2020: $429 million). Capital
expenditure mainly consisted of development expenditures in relation to the Karish Main and Karish
North Fields in Israel ($243.4 million) , NEA project in Egypt ($52 million), Cassiopea field in Italy ($37.0
million), Scott field in UK ($11.6 million) and exploration expenditures in relation to Glengorm and Isabella
in UK ($40.5 million) and Athena, Hercules, Hermes in Israel ($6.0 million).
Net Debt
As at 31 December 2021, net debt of $2,016 million (2020: $1,240 million) consisted of $2,500 million
Israeli senior secured notes, $450 million of corporate senior secured notes and $50 million of convertible
loan notes, less deferred amortised fees, equity component of convertible loan ($10.5 million) and cash
balances of $930.6 million. The Senior Credit Facility for the Karish-Tanin Development, the EBRD Senior
Facility, the EBRD Subordinated Facility and the New Egypt RBL Facility were repaid during the year
amounting to a total of $1,807 million.
In accessing the bond markets, Energean has converted floating interest rate exposure to fixed rates
giving a blended average interest rate of approximately 5% and increased Energean's weighted average
debt maturity to approximately six years.
Credit ratings
Energean maintains corporate credit ratings with Standard and Poor’s (S&P) and Fitch Ratings (Fitch).
On 4 November 2021 Energean plc was assigned its first corporate credit ratings from S&P and Fitch,
following the issuance of the $450 million senior secured notes which mature in 2027.
• S&P assigned a B corporate credit rating to Energean plc and B rating for the senior secured notes
maturing in 2027, with Positive Outlook. The positive outlook reflects the expectation that Energean
will successfully launch the Karish gas field in Israel in 2022, supporting the credit quality of
the company.
Page 74 of 273
• Fitch assigned a B+ corporate credit rating to Energean plc and B+ rating for the senior secured notes
maturing in 2027, with a Stable Outlook.
STRATEGIC REPORT
Risk management
Principal risks
There are no significant changes to the headline principal risks from those disclosed in the 2021 Interim
results. A full description of Energean’s principal risks will be disclosed in its 2021 Annual Report
& Accounts.
Commodity price risk
The Group undertakes hedging activities as part of the ongoing financial risk management to protect
against commodity price volatility and to ensure the availability of cash flow for re-investment in capital
programmes that are driving business delivery. Commodity hedge contracts entered into in Italy aim to
mitigate the risk of changes to the cost of natural gas and that relating to the sale of natural gas.
Hedge position
Gas
2022
2023
Sales Volume hedged (MWs)
Average priced hedged (€/MWs)
705,000
55.89
-
-
At 31 December 2021, the Group’s financial hedging programme on gas derivative instruments showed
a pre-tax negative fair value of $12.5 million (2020: nil) included in other comprehensive income, with no
ineffectiveness charge to the income statement.
Liquidity risk management and going concern
The Group carefully manages the risk of a shortage of funds by closely monitoring its funding position
and its liquidity risk. The Going Concern assessment covers the period up to 31 March 2023 ‘the
Forecast Period’.
Cash forecasts are regularly produced based on, inter alia, the Group’s latest life of field production,
budgeted expenditure forecasts, management’s best estimate of future commodity prices (based on
recent published forward curves) and headroom under its debt facilities. The Base Case cash flow model
used for the going concern assessment conservatively assumes first gas from Karish in October 2022,
Brent at $80/bbl in 2022 and $75/bbl in 2023 and PSV (Italian gas price) at €55/MWh in 2022 and
€40/MWh in 2023.
In addition, on a regular basis, the Group performs sensitivity tests of its liquidity position to evaluate
adverse impacts that may result from changes to the macro-economic environment such as a reduction
in commodity prices. The Group is not exposed to floating interest rate risk. The Group also looks at the
impact of changes or deferral of key projects. This is done to identify risks to liquidity to enable
management to formulate appropriate and timely mitigation strategies in order to manage the risk of
funds shortfalls and to ensure the Group’s ability to continue as a going concern. Such assumptions
underpin management’s reasonable worst-case scenario to further assess the robustness of the Group’s
liquidity position over the Forecast Period.
Reverse stress testing was performed to determine what levels of prices and/or production would need
to occur for the liquidity headroom to be eliminated, prior to any mitigating actions; the likelihood of such
conditions occurring was concluded to be remote. In the event an extreme downside scenario occurred,
prudent mitigating actions could be executed in the necessary timeframe such as a tightening of
operating costs and reductions/postponement of other discretionary exploration and development
expenditures. There is no material impact of climate change within the Forecast Period therefore it does
not form part of the reverse stress testing performed by management.
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STRATEGIC REPORT
1
As of 31 December 2021 the Group’s available liquidity was approximately $1 billion. In terms of the
Group’s Borrowing Facilities, the following was considered as part of management’s assessment:
Energean Israel Project Bond:
In March 2021 Energean raised $2.5 billion through the issuance of bonds to (i) refinance its $1.45 billion
Israel 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 capital and exploration
expenditure in Israel, including Karish and Karish North, and (iv) for general corporate purposes of
the Group.
2
Energean plc Corporate Bond:
In November 2021 Energean raised a $450 million Bond to (i) repay all amounts outstanding under the
Egypt and Greek RBLs plus subordinated debt, (ii) to pay fees and other expenses related to the Bond,
and (iii) for general corporate purposes of the Group.
There are no financial maintenance covenants associated with either of the Bonds.
3
Greek State-Backed Loan
In December 2021 Energean signed a €100 million loan backed by the Greek State which is to be used
specifically for the development of the Prinos Area in Greece, including the Epsilon development.
In forming its assessment of the Group’s ability to continue as a going concern, including its review of
the forecasted cashflow of the Group over the Forecast Period, the Board has made judgements about:
• Reasonable sensitivities appropriate for the current status of the business and the wider macro
environment; and
• The Group’s ability to implement the mitigating actions within the Group’s control, in the event this
were required.
After careful consideration, the Directors are satisfied that the Group has sufficient financial resources
to continue in operation for the foreseeable future, for the Forecast Period to 31 March 2023. For this
reason, they continue to adopt the going concern basis in preparing the consolidated financial
statements.
Events since December 2021
On 14 March 2022 - Energean signed a supply agreement with the Israel Electric Company, the largest
Israeli buyer of natural gas. IEC will now have the right to purchase natural gas from Energean’s fields.
The gas price will be determined in each period, with purchased amounts determined on a daily basis.
Starting upon the commencement of first gas production from Karish, the agreement will be valid for an
initial one-year period with an option to extend subject to ratification by both parties.
Non-IFRS measures
The Group uses certain measures of performance that are not specifically defined under IFRS or other
generally accepted accounting principles. These non-IFRS measures include Adjusted EBITDAX, cost of
production, capital expenditure, cash capital expenditure, net debt and gearing ratio and are
explained below.
Cash cost of production
Cash cost of production is a non-IFRS measure that is used by the Group as a useful indicator of the
Group’s underlying cash costs to produce hydrocarbons. The Group uses the measure to compare
operational performance period to period, to monitor costs and to assess operational efficiency. Cash
cost of production is calculated as cost of sales, adjusted for depreciation and hydrocarbon
inventory movements.
($m)
Cost of sales
Less:
Depreciation
2021
345.1
Pro forma 2020
2020
364.6
48.4
(94.6)
(163.1)
(22.1)
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STRATEGIC REPORT
($m)
Change in inventory
Cost of production
2021
11.1
261.6
Pro forma 2020
2020
(2.6)
198.9
2.2
28.5
Total production for the period (kboe)
14,963.5
17,621.0
1,331.0
Cash cost of production per boe ($/boe)
17.5
11.3
21.4
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is
calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation
and amortisation, other income and expenses (including the impact of derivative financial instruments
and foreign exchange), net finance costs and exploration costs. The Group presents Adjusted EBITDAX
as it is used in assessing the Group’s growth and operational efficiencies, because it illustrates the
underlying performance of the Group’s business by excluding items not considered by management to
reflect the underlying operations of the Group.
($m)
Adjusted EBITDAX
Reconciliation to profit/(loss):
Depreciation and amortisation
Share-based payment
Exploration and evaluation expense
Impairment loss on property, plant
and equipment
Other expense
Other income
Finance expenses
Finance income
Unrealised loss on derivatives
Net foreign exchange
Taxation income/(expense)
Loss for the year
Capital expenditure
2021
212.1
(97.5)
(5.7)
(87.7)
-
(7.0)
17.9
(97.4)
3.0
(21.5)
(6.9)
(5.4)
(96.2)
Pro forma 2020
2020
107.7
(8.3)
(166.3)
(3.2)
(164.6)
(182.9)
(35.0)
22.1
(16.9)
1.2
-
7.8
13.7
(416.4)
(24.1)
(3.2)
(4.4)
(65.3)
(28.3)
9.1
(5.0)
0.4
-
15.5
20.7
(92.9)
Capital expenditure is a useful indicator of the Group’s organic expenditure on oil and gas assets and
exploration and appraisal assets incurred during a period. Capital expenditure is defined as additions to
property, plant and equipment and intangible exploration and evaluation assets less decommissioning
asset additions, right-of-use asset additions, capitalised share-based payment charge and capitalised
borrowing costs:
Page 77 of 273
($m)
Additions to property, plant and equipment
Additions to intangible exploration and
evaluation assets
Less:
Capitalised borrowing cost
2021
521.4
54.8
168.2
181.0
Leased assets additions and modifications
8.7
Lease payments related to capital activities
(10.9)
Capitalised share-based payment charge
Capitalised depreciation
Change in decommissioning provision
Total capital expenditures
Movement in working capital
Cash capital expenditures per the cash flow
statement
0.2
0.2
(11.0)
408.0
44.3
452.3
Cash Capital Expenditure
($m)
Payment for purchase of property, plant and equipment
Payment for exploration and evaluation,
and other intangible assets
STRATEGIC REPORT
Pro forma 2020
2020
659.1
108.1
201.8
97.7
17.2
(12.0)
0.1
0.6
98.2
565.4
14.6
550.8
550.6
11.8
133.4
97.7
2.0
(6.6)
0.1
0.6
39.6
429.0
10.0
419.0
2021
403,503
48,674
2020
403,986
15,041
Total Cash Capital Expenditure
452,177
419,027
Net debt/(cash) and gearing ratio
Net debt is defined as the Group’s total borrowings less cash and cash equivalents. Management
believes that net debt is a useful indicator of the Group’s indebtedness, financial flexibility and capital
structure because it indicates the level of borrowings after taking account of any cash and cash
equivalents that could be used to reduce borrowings. The Group defines capital as total equity and
calculates the gearing ratio as net debt divided by total equity.
($m)
Current borrowings
Non-current borrowings
Total borrowings
Less: Cash and cash equivalents and bank deposits
Restricted cash
Net Debt
Total equity
Gearing Ratio
2021
-
2,947.1
2,947.1
(730.8)
(199.7)
2,016.6
717.1
281.2%
2020
1,113.0
330.0
1,443.0
(202.9)
-
1,240.1
1,194.4
103.8%
Page 78 of 273
STRATEGIC REPORT
Risk Management
Successful and sustainable implementation of our strategy requires strong corporate governance and
effective risk management. We deliver this through a comprehensive framework of business policies,
systems and procedures that enable us to assess and manage risk effectively.
Managing risks and opportunities is essential to Energean’s long-term success and growth. All
investment opportunities may expose Energean to increased risks, particularly in the current risk
environment, including climate change related risks and opportunities. Energean manages its exposure
to such risks in accordance with the Board’s appetite for risk.
Energean’s risk management framework provides a systematic process for the identification and
management of the key risks and opportunities which may impact the delivery of its strategic objectives.
KPIs are set annually and determining the level of risk Energean is willing to accept in the pursuit of these
objectives is a fundamental component of its risk management framework.
The Board operates a risk management framework for the Company and its subsidiaries (together the
“Group”) in order to identify, assess, control and monitor all current and emerging risks to the business
arising from the achievement of its strategic objectives. The risk management framework establishes
Energean’s internal control and risk management process and includes the following:
Group risk management framework
Outline the
strategy
• Set a sustainable strategy to
achieve Energean's near
and long-term goals
Define
strategic
objectives
• Set clear strategic
objectives supported by
relevant KPIs
Define risk
appetite
• Determine the level of risk that
the Group is willing to accept in
the pursuit of its strategic
objectives
Identify key
risks
• Identify key risks to the
achievement of strategic objectives,
through discussions at a Board,
Senior Management Team, regional
and functional level
Apply risk
assessment
process
• Apply the Group risk
assessment process to
ensure the ongoing
management of key risks to
our objectives
Deliver
strategic
objectives
• Delivery of strategic
objectives through
informed risk-based
decision making
Risk 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 the various business units and functions to Board committees and to
the Board itself.
Page 79 of 273
STRATEGIC REPORT
Energean’s Executive 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.
Group risk governance framework
Board of Directors
The Board is responsible for overseeing the risk identification, assessment and mitigation process and
undertakes regular assessments of the risks facing the Group, including current and emerging risks that
could potentially threaten our business integrity, strategy, operating model, future performance, solvency
and/or liquidity.
The overall tone for risk management is driven by the Board, which works closely with the 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; and
• Risk assessments.
Audit and Risk Committee
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 level Executives (e.g. Group CFO),
Functions (e.g. Technical /ICT) or Bodies (e.g. Senior Management Committee) that may participate in
the process.
Page 80 of 273
Top-down:Oversight, accountability, monitoring and assuranceThe BoardAudit and Risk CommitteeChaired by Andy Bartlett, Senior Independent Non-Executive Director•Responsible for setting the direction for risk management•Facilitates continual improvements of the risk management system•Monitors and reviews the scope and effectiveness of the Company's systems of risk and internal control•Monitors and reviews quarterly the Risk Heat Map of identified risks and provides feedback on potential next steps/ action items or other comments and suggestions.Executive Management TeamChaired by Mathios Rigas, CEO•Performsaquarterly'deep-dive'reviewoftheGroupriskregister.•Communicateswithriskownerstoensureassessmentoftheriskstothebusiness•Regularlyreviewsanddiscusseswiththeriskownerschallengingwhethermitigationsarebeingeffectivelyexecutedwithintheagreedtimeframe.
STRATEGIC REPORT
Financial Control
An integral part of the Energean internal control system is the internal control system for financial
reporting, which is responsible for the financial report preparation process in compliance with generally
accepted international accounting standards. Energean’s CFO and Head of Financial Control, in her
capacity as officer in charge of preparing financial reports, are responsible for planning, establishing and
maintaining the internal control system for financial reporting.
Internal Audit Function
The Internal Audit Function has a central role in the Group’s risk management and internal control system,
through objectively and independently evaluating controls, governance and risk management processes.
The Internal Audit is performed by PricewaterhouseCoopers Business Solutions S.A. (“PwC”), and the
Group’s Internal Audit Lead, who is responsible for coordinating the relevant assurance and consulting
engagements, aligning the internal audit risk assessment process with the Group risk register outcomes
and proposing a risk based annual audit plan to Audit & Risk Committee.
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.
Consolidation of business risks
To facilitate the assessment of the main risks facing the business, Energean undertakes a bottom-up
review of the key risks faced by the business through the execution of two subprocesses (Inherent Risk
Assessment and Residual Risk Assessment) and the key risks in each area are identified by the business
units and functions in the Group across all regions, including mitigating actions and any controls in place.
These are consolidated upwards into the Group’s risk register and assessed according to their likelihood
of occurring, as well as the potential consequences to Energean in terms of safety, reputational, financial,
operational or organisational impact.
From this, the Executive Management Committee identifies the enterprise level risks which can be linked
either to the Strategic Objectives or to the Business Model, which, taken together, are significant for
Energean. A member of the Executive Management Team has ownership and accountability for the
respective enterprise level risks. Collectively, the Executive Management Team reviews and discusses
the enterprise level risks challenging whether mitigations are being effectively executed within the agreed
timeframe. On a quarterly basis the enterprise level risks are discussed by the Board on a ‘Risk Heat Map’
to provide ‘top down’ challenge and support. The outcome of this review and the corresponding key
messages, are communicated back down to the business units and functions to facilitate risk awareness
and effective decision making throughout the Group.
Responding to the Changing Risk Environment in 2021
As part of our goal to continuously improve our risk management processes, the following tasks were
completed in 2021:
• The Board completed a deep-dive risk workshop which focused on further understanding potential
cyber threats to the business. The objective of the workshop was to provide the Board with further
insight into the growing threats from cyber risk with a focus on the changing risk environment
resulting from the increase in homeworking.
• Several activities were completed to assess our recently acquired Edison E&P business with respect
to bribery and corruption risks and mitigating controls in place including the completion of a risk
assessment conducted in all relevant operations of Energean Italy Spa, a business acquired through
the Edison E&P acquisition in Italy. The assessment covered several at risk activities related to bribery
and corruption risks, including commercial management, management of relations with public
authorities, process of purchasing goods and services, personnel recruitment and management,
Page 81 of 273
STRATEGIC REPORT
following which, the risk analysis which was produced, formed part of the implementation of the new
organisational Model 231, pursuant to the Legislative Decree no. 231/2001.
• A contingent liabilities, litigation and ongoing disputes dashboard was maintained to assess any
incidents, disputes or emerging risks that might trigger a potential financial liability impacting the
Group. The dashboard was presented at each Audit & Risk Committee meeting and semi-annually to
the Group financial controller and external auditors.
• To ensure awareness, understanding on and compliance with important governance, regulatory and
security topics, mandatory e-learning was also implemented across the Group translated, as
appropriate, in local languages, which included comprehensive modules on bribery and corruption,
preventing the facilitation of tax evasion, modern slavery and cyber security.
Climate change related risks and opportunities
Climate change related risks and opportunities are fully integrated with Energean’s multi-disciplinary,
Group-wide risk management process, as per the recommendations of the TCFD.
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 by reference to 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 announce a net-zero 2050 target,
using gas as the transition medium to a low carbon future.
To achieve this transition, climate change related risks and opportunities have been identified, and future
scenarios that facilitated in developing an integrated strategy approach have been analysed 78. Our
strategy and business plan to limit global warming has been structured, and is currently being
implemented, in three different phases; short, medium and long-term, as per our Climate Change Policy
published in 2021.
In 2021, the Nomination and ESG Committee was split in two, which created the Environment, Safety and
Social Responsibility Committee, which is chaired by Robert Peck and is attended by the Chair of the
Board, the CEO and the HSE Director, the latter being responsible for the operational management of any
and all climate change issues. The purpose of the Committee is to evaluate Energean’s policies and
systems for identifying and managing ESG risks, which includes the identification of climate change risks,
and to propose mitigation measures. The Committee convenes every quarter and reviews the Board
papers on Energean’s carbon emissions performance and KPIs.
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.
78 Please refer to “Our Strategy- Tackling Climate Change- Our Climate Change Strategy”.
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STRATEGIC REPORT
Principal risks and uncertainties
Symbols used in the following pages
Trend versus prior year indicates our
perception of pre-mitigation risk
Link to Business Model
Link to Strategy
▲ Increasing / worsening
A - Find and appraise
① - Eastern Mediterranean
▼ Reducing / improving
▬ Static
N New Risk
Z No longer a risk
B - Develop
C - Produce
D - Acquire
E - Implementing low
carbon solutions
② - Gas
③ - Tackling climate change
④ - Organic growth
⑤ - Value-driven and
return driven
Internally, the Group monitors and mitigates a more substantive list of risks, but those listed in the
following pages are the enterprise level risks which can be linked either to the Strategic Objectives or to
the Business Model, which, taken together, are significant for Energean. Our principal risks and risk
reduction actions are monitored and assessed on an ongoing basis. The following table provides a
summary overview of the principal risks to the Group against the previous year, while the following pages
provide for each principal risk an analysis of the potential impacts, the corresponding mitigation
measures, the risk appetite and the strategic objectives each of these risks may impact.
Highlights against previous year
Principal risks in 2020
Principal risks in 2021
Trend versus
prior year
#1 Strategic I - Progress key
development projects in Israel -
#1 Strategic -Operational Delivery ▼
#2 Strategic II- Market risk in Israel
#4 Strategic - Market risk in Israel ▼
#3 Strategic III - Progress key
development projects
#2 Strategic - Operational Delivery ▼
#4 Strategic IV - Deliver exploration
success and reserves addition
#3 Strategic- Deliver exploration
success and reserves addition
▼
#5 Strategic V - Portfolio Integration
#6 Operational risk I –
Production performance
Z No longer a risk
Z No longer a risk
# 6 Organisational & HR risk
N New Risk
#7 Operational risk II – JV misalignment
# 7 Operational risk -
Misalignment with JV operators
#8 Financial Risk I. Maintaining liquidity
and solvency
#5 Financial Risk - Maintaining
liquidity and solvency
#9 Financial Risk II - Egypt receivables
#10 Financial Risk III –
Decommissioning liability
#11 Organisational, compliance and
regulatory risk I - cyber attack
#8 Operational Risk - Egypt
receivables
#9 Operational Risk –
Decommissioning liability
#10 Cyber /ICT (Information
Communication Technologies)
Security
▲
▼
▼
▲
▲
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STRATEGIC REPORT
#12 Organisational, compliance and
regulatory risk II -Ethics, culture and
compliance
#11 Regulatory & Compliance -
Fraud, Bribery, and corruption
#13 Organisational, compliance and
regulatory risk III - HSE
#12 Health Safety and Environment
(HSE)
▬
▬
#13 Climate change risk I-Failure to
manage the risk of climate change and
to adapt to the energy transition
#14 Climate Change II - Physical risks
related to climate change
#15 Strategic-Geopolitical events
#13 Climate change
#14 Climate Change - Physical risks ▬
#15 Strategic- External geopolitical,
political, social risks
▬
▲
#16 External risk II - Global pandemic
#16 Pandemic
Energean’s enterprise-level principal risks that the Board considered to have a significant impact during
our planning horizon are categorised under one of the eight principal risk categories, which together with
the Pandemic, are outlined below on pages 85-103.
Categories of principal risks
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STRATEGIC REPORT
#1 Strategic - Operational Delivery
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 E
Link to 2021 KPIs: Delivering our strategy, growing our business and tackling climate change
Risk appetite
Low – Successfully delivering Karish in Q3 2022 is crucial in facilitating the Group’s
transition to a sustainable cash-flow generator.
2021 movement ▼ Although COVID-19 continued to cause challenges, good progress was made on our
flagship multi-tcf Karish gas development offshore Israel, which was approximately
92.5% complete at year end 2021. At the time of writing, Energean is targeting first gas
by Q3 2022. This timetable expects approximately four - five months from sail-away to
first gas, including the tow from Singapore to Israel, hook-up and commissioning.
Following completion of the pre-sail-away commissioning and testing of mechanical
and electrical systems, the final commissioning work will be performed offshore upon
arrival in Israeli waters.
Impact
Mitigation
Delayed delivery of first gas from the FPSO could result in a delay in delivering future
cash flows and thus 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 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 (“GSPA”s), 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 incentivise contractors to accelerate the completion
of works.
Energean’s contract with Technip is a lump-sum, turnkey EPCIC, which mitigates
development risk and the potential for significant cost overruns. Energean’s 2021
budget was updated to reflect the increased cost of interest and potential liquidated
damages arising from a delay in first gas.
Energean benefits from strong support from Government and continued engagement
with customers in Israel.
Energean has signed long-term contracts to supply 7.2 Bcm/yr of gas on plateau 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 sector-leading dividend. Energean’s GSPAs
are priced amongst the lowest in Israel, suggesting that buyers (who have signed
GSPAs which contain termination rights) will have limited incentive to terminate them
due to delay in first gas.
Force Majeure notices have been issued under all of the GSPAs in relation to COVID-
19. Subsequent updates were provided in writing to each buyer, as well as access to
data rooms and documentation on relevant governmental restrictions. As of today,
with the exception of Dalia, who sent notices to Energean, purporting to terminate its
gas sales agreement (for which please refer to “Review of Operations-Israel-GSPAs-
Existing GSPAs”), no claim was filed by such other buyers and no compensation is
payable by Energean.
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Energean’s responses to the foregoing and other communications with buyers are
aimed to maintain the full extent of Company’s rights for a Force Majeure relief under
each of its GSPAs.
Ongoing monitoring of KPIs by Executive Management.
2022 Objectives
First gas anticipated in Q3 2022. Thereafter, Karish will provide substantial, and
importantly, stable cash flows based on fixed contracts with floor pricing and take or
pay provisions.
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#2 Strategic - Operational Delivery
Principal risk: Delayed delivery of future development projects (including NEA / NI in Egypt, Cassiopea in
Italy and Epsilon in Greece)
Owner: Chief Executive Officer
Link to strategy: ① ② ④ ⑤
Link to business model: B C E
Link to 2021 KPIs: Delivering our strategy and growing our business
Risk appetite
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.
2021 movement ▼ This risk has decreased in 2021 as Energean continued to progress its development
portfolio in line with expectations against its strategic goals, albeit under the weight of
COVID 19.
• FID taken on NEA/NI (Egypt) in January 2021;
• EPCI contract awarded to TechnipFMC for NEA/NI in February 2021
• NEA/NI on track and 37.0% complete as of 31 December 202179
• Cassiopea (Italy) development on track and 24.2% complete at 31 December
202179
• Funding secured for the Epsilon Development in Greece.
Impact
Mitigation
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. For
further information, please refer to “Performance in 2021” on pages 9-11.
Ongoing monitoring of KPIs by Executive Management.
2022 Objectives
Developments to progress in line with expectations, targeting first gas from NEA/NI in
H2 2022, Cassiopea in H1 2024 and Epsilon H1 2023.
Continue to monitor project progress.
79 As measured under the TechnipFMC EPCIC.
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#3 Strategic- Deliver exploration success and reserves addition
Principal risk: Lack of new commercial discoveries and reserves replacement
Owner: Group Technical Director
Link to strategy: ① ② ④ ⑤
Link to business model: A C
Link to 2021 KPIs: Delivering our strategy and growing our business
Risk appetite
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.
2021 movement ▼ This risk has been slightly decreased in 2021. In January 2021, Energean reached
FID at the 1.2 Tcf (33 Bcm) Karish North field, 21-months after the announcement of
the discovery.
Energean’s preparatory work ahead of the offshore Israel drilling campaign progressed
in line with expectations during 2021. In June 2021, Energean signed a rig contract
with Stena Drilling for the Stena IceMax drillship. The contract is for the drilling of three
firm wells and two optional wells.
Drilling commenced in March 2022, and the campaign has the potential to double the
Israel gas resource base. For further information, please refer to “Performance in 2021”
on pages 9-11.
Impact
Mitigation
2022 Objectives
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.
The Group’s next major exploration and appraisal campaign, offshore Israel, is
on track.
Ongoing monitoring of KPIs by Executive Management Team.
Execute exploration and appraisal campaign offshore Israel.
Increase and diversify presence in Egypt. This was achieved in early 2022, with the
award of an exploration licence for the East Bir El-Nus concession (Block-8), in the
Western Desert of Egypt.
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#4 Strategic - 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 2021 KPIs: Delivering our strategy, growing our business
Risk appetite
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.
2021 movement ▼This risk decreased in 2021 versus 2020, due to rising gas demand in Israel and the
surrounding markets as a result of the recovery from the impact of COVID-19 on
demand.
In 2021, demand for gas in Israel was approximately 11.9 Bcm. Despite near-term
pressure on demand, Israel’s long-term gas demand outlook remains robust, with
demand forecast to grow to 15.7 Bcm by 2025 and approximately 20.1 Bcm by 203580.
Natural gas demand increase is driven by the enduring growth in electricity demand,
as well as by a transition of fuel mix, from coal and oil to natural gas and renewables.
Also in 2021, Energean signed a MOU with EGAS for the sale and purchase of up to 3
Bcm/yr of natural gas on average for a period of 10 years. This also represents a
commercialisation option for gas resources discovered in the 2022/23 Israel drilling
campaign. There are existing export pipelines from Israel to Egypt that Energean
can utilise.
Impact
Mitigation
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 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.
All existing contracted reserves and resources are to the domestic market, including
those of Karish North, for which it has been indicated that the normal export quotas
under "Adiri 1 and Adiri 2" will apply. The same is true for further discoveries.
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 is undertaken by Executive Management Team.
2022 Objectives
Energean will proactively seek to maintain good relationships with its gas buyers,
whilst also evaluating potential export routes and other options for monetisation.
80
Israel Ministry of Energy – Interim Report for the Examination of Government Policy on the Natural Gas Economy in Israel,
July 2021.
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#5 Financial Risk - 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 2021 KPIs: Growing our business
Risk appetite
Low – Energean seeks to set the foundations for the future via a solid capital structure.
2021 movement ▼ This risk has decreased in 2021. During the year, Energean raised over $3 billion
from the debt capital markets to refinance existing borrowings. Energean ended
the year with over $1 billion of liquidity.
Impact
Mitigation
Funding and liquidity risks could impact the Group’s viability and ability to continue as
a going concern, including a downturn in business operations for unexpected factors,
like pandemics.
The Company is exposed to commodity prices in relation to its sales and revenues
its crude oil and gas sales contracts, which are subject to variable
under
market factors.
Interest and foreign exchange rate movements could negatively affect profitability,
cash flow and balance sheets (see Notes 27.3 and 27.5 to the consolidated
financial statements).
Erosion of balance sheet through impairments of financial assets may further impact
the Group’s financial position81.
In 2021, Energean raised over $3 billion from the debt capital markets to refinance
existing borrowings and increase liquidity. This included: (i) $2.5 billion senior secured
notes, non-recourse to the Group, at the 100% subsidiary Energean Israel, (ii) €100
million Greek state backed loan, non-recourse to the Group, at Energean Greece and
(iii) $450 million senior secured notes at Energean plc. In doing so, Energean extended
the weighted average maturity to approximately six years, pushed out commencement
of major debt repayment obligations to 2024 and converted floating interest rates to
fixed rates.
The Group ended the year with over $1 billion of liquidity82, ensuring it is fully funded
to deliver our projects, removing any near-term debt repayment obligations and
eliminating exposure to interest rate volatility.
Moving forward:
• Financial covenants are incurrence based rather than maintenance covenants and
therefore management of the same is fully within the control of the Group. The
covenants are monitored, inter alia, in the context of setting the dividend policy,
paying a dividend, making an acquisition or raising additional debt.
• 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.
2022 Objectives
Evolve the capital allocation strategy from capital investment to sustainable cash-
flow generation.
81 For further information, please refer to Going Concern disclosure on pages 185-186 and Viability Statement disclosure on
pages 104-105).
Including restricted cash amounts of $200 million and undrawn Greek debt facility of €100 million.
82
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#6 Organisational & HR risk
Principal risk: The potential risk of group level roles being overwhelmed by the additional workload
associated with the Edison integration.
Owner: HR Director
Link to strategy: ④ ⑤
Link to business model: B, D
Link to 2021 KPIs: Delivering our strategy, growing our business
Risk appetite
2021 movement
Impact
Mitigation
Low – The pursuit of our strategy relies on attracting, motivating and retaining key
talented people and their knowledge and expertise. Our performance and ability to
grow depends on it.
N New Risk
The pandemic has changed how people think about work. Priorities have shifted and
workforce expectations have, and continue to change, in terms of flexible and remote
working combined with the challenge of current and future wage inflation.
We celebrated one year from the successful completion of the Edison acquisition. The
organisational structure following the close of this transaction continues to evolve.
The impact of rapid growth, if poorly managed, puts additional pressure on people,
their performance and wellbeing and could result in talent loss, particularly among high
performers.
Talented People and Responsible Operations are two of our key business model
foundations. Energean has a clearly defined recruitment drive to increase the
headcount for Group level roles and has also launched an employee assistance
program and a performance management process, alongside the competency
framework, introduced in February 2022.
Energean has active employee’s incentives plans (LTIP, DBP and MBO awards) as well
as an internal career development process.
Ongoing monitoring of KPIs by Executive Management.
2022 Objectives
Energean will continue to foster a culture of inclusion and diversity, as well as
streamlining the learning and knowledge sharing processes.
Continuous Performance enabled via SAP SuccessFactors to maximise value.
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#7 Operational risk - Misalignment with JV operators
Principal risk(s): Misalignment with JV operators
Owner: Technical Director
Link to strategy: ① ② ④ ⑤
Link to business model: C
Link to 2020 KPIs: Growing our business
Risk appetite
Medium – The Group seeks to operate assets which align with the Group’s core areas
of expertise, but recognises that a balanced portfolio will also include non-operated
ventures. The Group accepts that there are risks associated with a non-operator role
and will seek to mitigate these risks by working with partners of high integrity and
experience and maintaining close working relationships with all JV partners.
2021 movement ▲ – The risk increased in 2021 as a large component of the Italian portfolio and the
Impact
Mitigation
entire UK portfolio are operated by joint venture partners.
Cost/schedule overruns.
Poor operational performance of assets.
Delay in first production from new projects.
Negative impact on asset value.
Ability to effect change towards lowering carbon footprint.
Actively engage with all JV partners early to establish good working relationships.
Actively participate in operational and technical meetings to challenge, apply influence
and/or support partners to establish a cohesive JV view.
Active engagement with supply chain providers to monitor performance and delivery.
Application of
risk management processes and non-operated
ventures procedure.
Ongoing monitoring of KPIs by Executive Management.
the Group
2022 Objectives
Continue to proactively engage with JV partners and monitor JOA procedures.
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#8 Operational Risk - Egypt receivables
Principal risk: Recoverability of revenues and receivables in Egypt
Owner: Country Manager Egypt
Link to strategy: ① ② ④ ⑤
Link to business model: A B C D E
Link to 2021 KPIs: Growing our business
Risk appetite
Low –The Group utilises its strong regional ties and the experience of its commercial
teams to mitigate this risk.
2021 movement ▼ The risk has substantially decreased in 2021 as Energean reduced its total EGPC
receivables position in Egypt to less than $95 million compared to the balance
prevailing at the economic reference date of the Edison E&P acquisition (1 January
2019: $240 million) and $149 million as at 31 December 2020.
Impact
Mitigation
Loss of value.
Work programme restricted by reduced financial capability.
Reduced ability
outstanding debt.
to meet debt covenants
(incurrence only) and service
Energean has a number of contractual solutions with EGPC to ensure an effective
collection policy, including condensate proceeds, lump-sum payments, Abu Qir
payables offsetting and local currency collection.
Continued engagement with the Egyptian government and Ministry of Petroleum.
Proposals for structuring and planning of overdue repayment, on a regular basis.
Ongoing monitoring of KPIs by Executive Management.
2022 Objectives
Further improve receivables position and agreements in place to accelerate recovery
of overdue receivables.
Maintain an active investment programme.
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#9 Operational Risk - Decommissioning liability
Principal risk: Higher than expected decommissioning costs and acceleration of abandonment
schedules
Owner: Technical Director
Link to strategy: ⑤
Link to business model: D
Link to 2021 KPIs: Growing our business
Risk appetite
Low – Energean is committed to optimising its decommissioning activities and spend.
2021 movement ▲The risk increased in 2021, mainly due to the inherent regulatory uncertainty related
to decommissioning activities; legislative complexities; and the current absence of
specific legislative references at national and international level for the regulation of
decommissioning activities.
Impact
Mitigation
Uncertainty in relation to the planning of decommissioning time and costs.
Reduction in cash flow.
Negative impact on asset value.
Substantial increase in long-term liabilities on balance sheet.
jointly
interaction with
local government and regulation bodies to
Utilisation of the strong experience of Energean’s technical teams and commercial
partnerships.
Proactive
design/review decommissioning regulations.
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.
Adoption of abandonment cost cap insurance.
Ongoing monitoring of KPIs by Executive Management.
2022 Objectives
Continue to develop and refine strategy for optimising decommissioning spend.
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#10 Cyber/ICT (Information Communication Technologies) Security
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 2021 KPIs: Growing our business and ‘Best in Class’ on safety
Risk appetite
Low – Energean is committed to maintaining the security and integrity of its data and
IT systems.
2021 movement ▲ This risk increased in 2021. Energean continues to grow its operational presence in
several sites and the industry remains a target putting the Group at further risk of
cyber-attacks or IT system failure.
Impact
Mitigation
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.
Annual mandatory security and GDPR awareness training. Staff susceptibility to
phishing regularly tested.
Comprehensive insurance policies in place.
Ongoing monitoring of KPIs by Executive Management.
2022 Objectives
Improvements and enhancements needed in most aspects, currently pursued.
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#11 Regulatory and Compliance - Fraud, Bribery and corruption
Principal risk: Major breach of values, business principles and ‘Ethos’
Owner: Chief Executive
Link to strategy: ⑤
Link to business model: A, B, C, D, E
Link to 2021 KPIs: Growing our business
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 or integrity.
2021 movement ▬ This risk remained static in 2021. There were no reportable instances of fraud,
bribery or corruption.
Impact
Reputational damage.
Financial penalties or civil claim.
Criminal prosecution.
Mitigation
Strong governance and anti-corruption policies and procedures. Audit reviews, use of
data analytics and continuous monitoring of bribery and corruption controls across
the Group to assess compliance. Robust financial procedures
in place to
mitigate fraud.
Annual training programme in place for all employees, available also in local
languages.
Enhanced due diligence of business partners and customers and compliance auditing
on major contractors.
Ongoing monitoring of KPIs by Executive Management.
2022 Objectives
Continued focus on employee awareness communication and training to all different
countries of operations, including in person training and workshops, as appropriate.
A bribery and corruption risk assessment will be conducted in countries deemed of a
higher risk, which will supplement the group risk assessment already in place.
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#12 Health Safety and Environment (HSE)
Principal risk: Lack of adherence to health, safety and environment policies
Owner: HSE Director
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C
Link to 2021 KPIs: ‘Best in Class’ on safety
Risk appetite
Low – Energean is committed to managing its operations in a safe and reliable manner
to prevent major accidents and to provide a high level of protection to its employees
and contractors.
2021 movement ▬ This risk remained static in 2021. The Group’s pro forma LTIF83 for operated activity
in 2021 was 0.33 per million hours worked (down from 0.88 in pro forma 2020). Our
TRIR84 for 2021 was 0.77 per million hours worked (down from 1.47 in pro forma
2020). There were no spills to the environment.
Impact
Mitigation
2022 Objectives
Serious injury or death.
Negative environmental impacts.
Reputational damage.
Regulatory penalties and clean-up costs.
Loss or damage to Company’s assets and potential business interruption.
Loss or damage to third parties and potential claims.
Effectively managing health, safety, security and environmental risk exposure is a top
priority for the Board, Senior Leadership Team and Management Team.
Ongoing monitoring of KPIs by Executive Management is also undertaken.
Development and implementation of the Health Safety Environmental (HSE) & Social
Responsibility (SR) policy that sets out corporate values, standards and expectations
with respect to all HSE & SR matters in relation to company’s employees, partners,
stakeholders, general public, environment and sustainable development.
Implementation and maintenance assurance of an HSE Management System and an
effective H&S framework, covering all Energean's expectations and as per international
standards.
Implementation and maintenance assurance of suitable and effective Crisis
Management and Emergency Response and Management Plans as per Energean's
expectations and standards.
Implementation and maintenance assurance of the Corporate Major Accident
Prevention policy (CMAPP), covering Energean's expectations and standards.
Establish and implement the already developed HSEMS on Energean Power in Israel
Have in place all the required HSE permits for the drilling campaign in Israel
Have in place all the required HSE permits for Energean Power in Israel
Plan an internal audit to be performed in 2022 to monitor the level of countries’
compliance to the group guidance
83 Lost Time Injury Frequency.
84 Total Recordable Incident Rate.
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#13 Climate change
Principal risk: Failure to manage the risk of climate change and to adapt to the energy transition
Owner: Chief Executive Officer and - HSE Director
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2021 KPIs: Delivering our strategy, growing our business and tackling climate change
Risk appetite
Low – The Group is committed to achieving its net-zero emissions85 target by 2050
its operations through the
and reducing the near-term carbon
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.
intensity of
2021 movement ▬This risk remained static in 2021. The Group’s significantly increased gas production
in 2021 analysed in the light of IPPC’s 2021 report and global pledges agreed at COP26
seem to impose medium to long term challenges for our adaptation and resilience to
the energy transition.
Impact
Mitigation
Reputational damage and loss of investors and providers of capital.
Reduced demand for Company’s products due to technology developments towards
alternative energy sources.
Climate-related policy changes with associated increased costs.
Ability to effect change towards lowering carbon footprint.
Aligned with the TCFD recommendations across all TCFD pillars in our year-
end reporting.
Climate change strategy development for the reduction, sequestration and offsetting
of greenhouse gas emissions. This includes performance optimisation and carbon
capture and offsetting projects.
in top quartile, awarded ‘AA’ rating by MSCI,
Carbon shadow prices are taken into consideration in the evaluation of projects and
investments viability.
Active commitment to CSR goals and targets.
Strengthen our low carbon portfolio and reduce our GHG emissions intensity by
shifting production from oil to gas.
ESG ratings
‘Gold’ by Maala,
"Outperformer" 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 and now
investigating acceleration of our 2050 net-zero commitment.
Roll out of ‘Green Electricity’ across all operated assets. Agreements are already in
place for purchasing 'Green Electricity' in our production sites in Greece, Italy, Israel
and in Croatia and Egypt premises.
Established a new climate change and sustainable development department to
manage climate change projects.
Implemented climate-based scenario analysis and internal carbon pricing to assist
with investment-decision making.
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.
Published our first Climate Change Policy in 2021.
85 Scope 1 & 2 emissions.
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2022 Objectives
STRATEGIC REPORT
Evaluation of Carbon Capture and Storage (CCS) projects underway, including the
maturation of the convention of Prinos into the first CCS project in the East Med. The
Prinos CCS proposal has been included in the Recovery & Resilience Fund (RRF)
implementation proposal for Greece.
Small-scale blue hydrogen production facility at the Sigma plant in Kavala, Greece, also
under evaluation. We have received the formal confirmation by Important Projects of
Common European Interest (IPCEI) UE Committee that our Eco-Hydrogen unit
proposal (blue-hydrogen with carbon capture of more than 99%) is included in next
IPCEI wave named “Regional Hubs And Their Links (RHATL)”, to work coupled with the
Prinos CCS site.
Evaluation of use of captured CO2 at Prinos for enhanced oil recovery (EOR), to unlock
additional upstream value. A proposal to the European Structural and Investment
Funds (ESIF) through the Greek Partnership Agreement for the Development
Framework (PA) for the design and evaluation of the feasibility and effectiveness of
the re-injection of Acid Gas in Prinos reservoirs, has been approved for financing.
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#14 Climate Change - Physical risks
Principal risk: Disruption to operations and/or development projects due to severe weather
Owner: HSE Director
Link to strategy: ① ② ③ ④ ⑤
Link to business model: A B C D E
Link to 2021 KPIs: Delivering our strategy, growing our business and tackling climate change
Risk appetite
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 evaluating measures to reduce the exposure and vulnerability of both its
assets and its people to weather and climate events.
2021 movement ▬ This risk remained static in 2021. 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. 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 could result in faster degradation
of infrastructure and necessitate operational changes to the running of the
Group’s facilities.
Impact
Mitigation
Unexpected asset costs arising from operational incidents.
Negative market reaction.
Loss of investor confidence.
Serious injury or death.
Environmental impacts due to spills.
Reputational damage.
Loss or damage to assets and business interruption.
Monitoring of weather conditions and sea conditions. Energean collaborated with the
Democritus University of Thrace to install the Odyssea Platform (an innovative
monitoring marine data system) at the Prinos area assets.
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.
A vulnerability assessment on the physical risks due to climate change performed in
June 2020 at the Prinos asset concluded that natural disasters have a minor potential
impact on the asset. Management believes that same vulnerability assessment
provides adequate information for 2021 reporting purposes.
2022 Objectives
Continue monitoring of environmental conditions and reporting at both an asset and
corporate level.
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#15 Strategic- External geopolitical, political, social risks
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 2021 KPIs: Delivering our strategy and growing our business
Risk appetite
Medium – Energean’s aim is to lead the energy transition in the eastern Mediterranean
through a strategic focus on gas and achieve its net-zero ambition by 2050, whilst
delivering meaningful and sustainable returns to our shareholders. 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.
2021 movement ▬ This risk remained static in 2021. Energean continues to screen new opportunities
in the Eastern Mediterranean and this can be in jurisdictions deemed at higher risk of
political or fiscal uncertainty. At the same time, the Group strives for full compliance
with regards to fiscal requirements across all assets.
Impact
Mitigation
2022 Objectives
Loss of value; increasing costs; uncertain financial outcomes; loss of asset value.
Operate to the highest industry standards and monitor compliance with the Group’s
license portfolio, production sharing contracts and taxation requirements.
Maintain sustained and 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.
Legal/regulatory and strategic assessment ahead of any commitment.
In Greece, the long-lasting experience in the field and the “first-mover’ advantage is a
considerable opportunity for the Group to employ efficient CCS technologies in Prinos,
where we already operate.
Continued monitoring of geopolitical events and regulatory changes.
Undertake risk assessment activities in relation to new projects.
Integration of targets and sustainability projects (i.e. community investment) within
the strategic plan and management incentive program.
Energean strives to become a leader in CCS in the Eastern Mediterranean and is
confident that we will be part of the solution.
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STRATEGIC REPORT
#16 Pandemic
Principal risk: Risk related to the spread of pandemics and epidemics and the continuing impact of
Covid 19, including the associated deterioration of health response capacity, financial and business
disruption, whilst maintaining operability.
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 2021 KPIs: Delivering our strategy, growing our business and ‘Best in Class’ on Safety
Risk appetite
Low – Throughout 2021, the pandemic continued to impact countries around the
world, spurring new lockdowns and business disruptions. Although lockdowns
continued to challenge us and the way we work and interact with each other,
Energean’s number one priority is to protect the health and wellbeing of its people and
to ensure business continuity.
2021 movement ▲ This risk increased in 2021. As a business, and at individual levels, conditions were
extremely challenging. From a project delivery perspective, delays associated with
COVID-19 have had a significant impact on the construction work associated with the
FPSO and the progress of the Karish project.
Impact
Mitigation
Project delays; delay in revenue income, supply chain interruption; HSE risk / risk to
employee wellbeing; operational restrictions e.g. ability to mobilise workforce.
Energean has taken significant actions to mitigate the impact of COVID-19 on the
wellbeing of its workforce, including:
Specific control measures, social distancing, and working from home (more than 50%
of office workers worked from home in 2021) 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
Introduced a global Employee Assistance Program offering professional support to
address any personal challenges affecting their well-being.
Closely monitoring official national guidance.
Implementation of Business Continuity Plans at all workplaces, providing suitable
mitigation measures ensuring operational continuity.
Energean also promoted other teambuilding activities including online cooking,
running for good causes, and hosting a variety of workshops and webinars. We also
ensured that all our employees groupwide are covered with private medical insurance.
2022 Objectives
Continued re-assessment of our contingency planning, our emergency/incident
response plan and our business continuity management plan.
Emerging risks
Russia’s war on Ukraine seems to have created new challenges for Europe and is expected to lead into
significantly higher prices of several commodities including energy (gas, oil and ultimately electricity),
deteriorate trade links and lead to overall higher uncertainty, affecting both economic and financial sector
confidence. It has also underlined the dangers of Europe’s dependency on Russian oil & gas and any
implications associated thereto. Current tensions have stoked fears of disruption of Russian gas flows
to EU member states leading potentially to energy shortages which has resulted so far to even higher
prices for European consumers who are already experiencing a severe cost-of-living crisis.
Given potential continuing uncertainty over Russia's oil and gas supplies to Europe, the European
Commission is trying to accelerate actions towards diversifying its supply and increasing its energy
Page 102 of 273
STRATEGIC REPORT
independence. A new Commission communication published on 8 March86 sets out a new framework
for more affordable, secure and sustainable energy (REPOWER EU) and specifically calls for a phasing
out of fossil fuels dependence from Russia before 2030: The framework calls for a new EU gas storage
policy, diversification of gas supplies, via higher LNG imports and pipeline imports specifically from non-
Russian suppliers, and for higher levels of biomethane and hydrogen production. These actions are
naturally to be complemented with further efforts towards energy efficiency, increasing the share of
renewable and addressing infrastructure bottlenecks. Energean, with E&P assets in the east
Mediterranean is well placed to contribute to these joint European efforts towards increasing the diversity
of energy supply and also build towards the affordability of natural gas as a transitional fuel towards
decarbonisation and a pre-cursor to clean hydrogen production.
Meanwhile, rising tensions between the West and Russia will likely damage regional stabilisation efforts,
particularly in the Middle East. Most importantly, all-out war between Russia and Ukraine has already
prompted a sharp increase in global energy and wheat prices, with a devastating humanitarian impact
on already fragile countries in the area, whose governance problems could worsen.
Although not directly affected on our operations as there is no immediate impact with respect to the
safety and security of our people and operations in East Mediterranean and North Sea and in any
neighbouring countries, Energean will closely and actively continue to monitor the wide-ranging
challenges to all countries in which we operate.
Main risk areas for management focus should be the subsequent sanctions and export controls imposed
by countries around the world and how these could have an impact on a number of our activities,
including supply, trading and treasury activities as more sanctions and export controls are expected.
Given the evolving situation, there are many other unknown factors and events that could materially
impact our operations but cannot be fully defined as a specific risk at present, and therefore cannot be
fully assessed or managed. These risks and future events could impact indirectly our supply chain,
commodity prices, credit, commodity trading, treasury and legal environment including any increased
taxation in the countries in which we operate. The tensions also might create heightened cyber-security
threats to our information technology infrastructure onshore or offshore.
The Group has identified all these emerging risks and is actively assessing and monitoring these.
86 COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL,
THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS REPowerEU: Joint European
Action for more affordable, secure and sustainable energy COM/2022/108 final.
Page 103 of 273
STRATEGIC REPORT
Viability Statement
The Directors have assessed the viability of the Group over a 3 year period until 31 December 2024. The
assessment started from the Year End 2021 actual financial position and considered the potential impact
of the principal risks documented in the report on its forecasted financial projections. The basis for the
forecasts is the Group Working Capital Model.
The board conducted the review over a 3-year period for the following reasons:
• The Group’s key strategic projects, Karish, Karish North, NEA/NI, Cassiopea and Epsilon are expected
to be onstream by mid-2024 delivering Energean’s medium term plan targets of $1.4 billion EBITDAX
and 200 Kboe/d
• This period covers the remaining capital intensive investment phase until respective first production
from each of the strategic projects. These investments will materially increase the Group’s free
cashflow from H2 2022 in particular, when the Karish field comes online.
• Energean raised $2.5 billion of project bonds for its Israel Project, the first tranche of bonds are due
for repayment in 2024 therefore the viability period captures both the coupon payments and the first
principal repayment.
Based on these factors, the board considers that an assessment period up to 31st December 2024
appropriately reflects the underlying potential and viability of the Group and is the period over which
principal risks are reviewed.
In order to make an assessment of the Group’s viability, the Board has carried out a detailed assessment
of the Group’s principal risks, and the potential implications these risks could have on the Group’s liquidity
and its business model over the assessment period. This assessment included (i) monthly cash flow
analysis, (ii) a number of sensitivity scenarios and (iii) a reasonable worst-case scenario including a
combination of various sensitivities, together with associated supporting analysis provided by the
Group’s finance team. Sensitivity analysis focused on commodity price downside, slower-ramp up in gas
offtake in Israel, downward pressure on contracted gas-prices in Israel due to an assumed delay and
other strategic project delays (outside of Israel).
A summary of the key assumptions, aligned to the Group’s principal risks, and the sensitivity scenarios
considered can be found below.
Principal Risks
Base Case Assumptions
Sensitivity Scenarios
Strategic Risk: Delay to First
Gas at Karish
First Gas from Karish in October
2022 – conservative
assumption given Group’s
target of first gas in Q3 2022
No further delay to first gas
given conservative base case,
however sensitivity applied to
both gas price and offtake
ramp-up (see below) and
increase in capex to account
for potential cost increase due
to delay
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
Minimum ACQ contracted
volumes at floor prices, with
conservative % ramp-up during
the first 12 months
Slower ramp-up and reduction
in average floor price – to
reflect potential renegotiation
or cancellation of contracts
Page 104 of 273
Principal Risks
Base Case Assumptions
Sensitivity Scenarios
STRATEGIC REPORT
Strategic Risk: Delayed delivery
of future development projects
(including NEA / NI in Egypt,
Cassiopea in Italy and Epsilon
in Greece)
First gas from NEA and NI
assumed October 2022 and
July 2023 respectively,
Cassiopea in H1 2024 and
Epsilon in H1 2023.
Maintaining liquidity and
solvency - Financial Risk:
Insufficient liquidity and
funding capacity
Climate Change related risks:
failure to manage the risk of
climate change and to adapt to
the energy transition
Oil price based on material
discount to recent forward
curve, at $80/bbl in 2022,
$75/bbl in 2023 and $70/bbl
in 2024.
PSV gas price based on
material discount to recent
forward curve, €55/MWh in
2022, €40/MWh in 2023 and
€30/MWh in 2024
FX rate for costs in € of €1: $1.2
FX rate for costs in £ of £1: $1.4
The $2.5 billion and
$450 million bonds have a fixed
coupon i.e. no exposure
to LIBOR
Carbon costs included across
the portfolio where applicable,
e.g. in Greece.
Budget expenditure for green
projects and or investments
included in the base case such
as (i) €4 million for on-site
projects for absolute emissions
reduction, (ii) €0.5 million
investment in carbon removal
projects (iii) FEED studies for
CCS project.
3 month delay to NEA/NI and
Epsilon.
Cassiopea timeline in base
case already has a
conservative start date, no
adjustment made.
Reduction of $5/bbl in oil and
€5/MWh for PSV resulting in c.
40% reduction and 50%
reduction vs. forward curve
respectively.
Free allowances are used up
until 2025 therefore charges
are projected to be incurred
outside of the Viability Period
Under such individual and combined sensitivity scenarios the Group’s cash position at the end of viability
period remains extremely robust. Nevertheless 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 shifting
of expenditures under our control.
Based on the results of the analysis the Board of Directors has a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they fall due over the period of
their assessment.
Page 105 of 273
CORPORATE GOVERNANCE
Corporate Governance
Board of Directors
Karen Simon
Non-Executive Chairman
Ms. Simon was appointed as an independent non-executive director in September 2017 and became
Non-executive Chairman in November 2019. Ms. Simon was formerly a Vice Chairman in J.P. Morgan’s
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, Crescent Energy, a New York Stock
Exchange listed energy 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 – Independent Non-Executive Director
• Crescent Energy - Independent Non-Executive Director
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.
Independent:
• N/A.
Committee membership:
• N/A.
Current external appointments:
• None.
Page 106 of 273
CORPORATE GOVERNANCE
Panagiotis (Panos) Benos
Chief Financial Officer
Mr. Benos has 18 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:
• N/A.
Current external appointments:
• N/A.
Andrew Bartlett
Senior Independent Director
Mr. Bartlett was appointed as an independent non-executive director in August 2017. Mr. Bartlett has
over 30 years’ experience in the upstream oil and gas industry and currently serves as a Non-Executive
director for Africa Oil Corporation and Prime Oil & Gas B.V. and as Energy Adviser to Helios Investment
Partners LLP (a private equity partnership focused on Africa). Before his current directorships, Mr. Bartlett
served as the 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 Shell plc between 1981 and 2001, as a petroleum engineer and development manager,
where he gained extensive experience in the upstream operations of oil and gas fields and latterly as a
founding VP of Shell Capital. He holds an MSc in Petroleum Engineering from Imperial College London.
Independent:
• Yes.
Committee membership:
• Audit & Risk Committee – Chair
• Remuneration & Talent Committee – Member.
Current external appointments:
• Africa Oil Corporation - Non-Executive Director, Head of Audit Committee
• Prime Oil and Gas B.V. - Non-Executive Director, Head of Audit Committee
• Adviser to Helios Investment Partners LLP
Efstathios (Stathis) Topouzoglou
Non-Executive Director
Mr. Topouzoglou was appointed as a non-executive director in May 2017. Mr. Topouzoglou is a founding
shareholder of the Energean Group and co-founder of Prime Marine Corporation (“Prime”), serving as
Prime’s chief executive officer and managing director. Prime, a leading worldwide product tanker
company, is a major global provider of seaborne transportation for refined petroleum products, LPG and
ammonia. Mr. Topouzoglou has more than 39 years of experience in founding and growing companies
in the energy transportation sector and holds a B.A. in Business Administration and Economics from the
University of Athens, Greece.
Page 107 of 273
CORPORATE GOVERNANCE
Independent:
• No
Committee membership:
• Nomination & Governance – Member
• Environment, Safety & Social Responsibility – Member.
Current external appointments:
• Chief Executive Officer and Managing Director of Prime Marine Corporation.
Robert W. Peck
Independent Non-Executive Director
Former Ambassador Robert W. Peck was appointed as an independent non-executive director in July
2017. He is a 35-year veteran of Canada's diplomatic service. He 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. As Canada’s representative to both Algeria
and Greece, Ambassador Peck worked closely with both the Canadian oil and gas and mining sectors.
Earlier he occupied senior roles at headquarters in Ottawa including as Chief of Protocol of Canada and
Press Secretary to the Minister of Foreign Affairs. On leave from the Government of Canada from 2000
to 2002 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
Committee membership:
• Environment, Safety and Social Responsibility - Chair.
• Nomination & Governance – Member
• Remuneration & Talent - Ex Officio member as board's employee representative
Current external appointments:
• n/a
Amy Lashinsky
Independent Non-Executive Director
Ms. Lashinsky was appointed as an independent non-executive director in November 2019. Ms.
Lashinsky is the Co-Founder and Chief Executive of Alaco, an international risk management and
business intelligence consultancy. Most active in the emerging and frontier markets, she has over three
decades’ experience advising multinationals, financial institutions and investors on matters such as
reputational risk and ESG criteria, delivering intelligence reports to support transactions around the world.
She also works with global law firms and their clients on various contentious matters, from strategic
litigation support to asset tracing and judgement enforcement brought about through arbitration or
litigation. Ms. Lashinsky trained as a securities analyst on Wall Street before joining Kroll in New York in
1985. She moved to London in 1988 to help establish Kroll's first overseas office, where she became
Managing Director of its business intelligence unit. In 1995, Ms. Lashinsky set up Asmara Limited, which
was sold to NYSE-listed Armor Holdings in 1998, before co-founding Alaco in 2002. Ms Lashinsky
graduated from the University of Michigan with a B.A. in Political Science. In addition to her duties at
Energean, she is a Trustee of the Rathbones Folio Prize for Literature.
Independent:
• Yes
Committee membership:
• Environment, Safety and Social Responsibility – Member
• Audit & Risk– Member.
Page 108 of 273
CORPORATE GOVERNANCE
Current external appointments:
• Alaco Limited – Chief Executive Officer
Kimberley Wood
Independent Non-Executive Director
Ms. Wood was appointed as an independent non-executive director in July 2020. 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 – Chair
• 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
Independent Non-Executive Director
Mr. Persianis was appointed as an independent non-executive director in July 2020. Mr. Persianis is an
experienced Non-Executive Director with over 30 years’ international financial markets experience in
central banking, asset management and Corporate Strategy. He is currently the Managing Director of
Fiduserve Asset Management in Cyprus, a regulated Alternative Investment Fund Management company
that sets up and manages private funds for a diverse range of private and institutional clients. Before that
he was Founder and Managing Director of Centaur Financial Services, a discretionary portfolio
management company with presence in the UK and Cyprus. He has served as a Non-Executive Director
at Central Bank of Cyprus (2014-2019) and on the Bank of Cyprus Board in 2013. He is currently serving
as an Independent Non-executive Director on the board of Hellenic Bank. He has also worked as a Senior
Manager at Bain & Company (London), one of the world’s largest strategy consulting firm. He holds an
Electrical Engineering undergraduate degree from the University of Cambridge and a Master’s in
Business Administration (MBA, Major
Investment Banking) from the Wharton
Business School.
in Finance &
Independent:
• Yes
Committee membership:
• Audit & Risk – Member
• Environment, Safety and Social Responsibility – Member.
Page 109 of 273
CORPORATE GOVERNANCE
Current external appointments:
• Hellenic Bank PLC– Independent Non-Executive Director.
Roy Franklin
Independent Non-Executive Director
Mr. Roy Franklin was appointed non-executive director in October 2021. Mr. Franklin has over 45 years
of experience as a senior executive in the oil and gas industry. He began his career at BP where he spent
18 years, and served as head of M&A at BP Exploration as his latest position. After leaving BP, Mr. Franklin
acted as managing director of Clyde Petroleum, and then as CEO of Paladin Resources until its
acquisition by Talisman Energy in 2005. Mr. Franklin has extensive experience as a non-executive
director. He sat on the boards of Amec Foster Wheeler plc (2016-2017), Keller Group plc (2007-2016),
Equinor A/S (2015-2019), Premier Oil PLC (2017-2021) and Santos Limited (2006-2017). Mr. Franklin also
acted as a member of the Advisory Board of Kerogen Capital LLC until September 30, 2021. Mr. Franklin
currently acts as Chair of the international energy services group, John Wood Group PLC, as well as a
non-executive Director of Kosmos Energy. Mr. Franklin holds a Bachelor of Science in Geology from the
University of Southampton, and in 2004 was awarded an OBE in recognition of his services to the Oil &
Gas industry.
Independent:
• Yes
Committee membership:
• Nomination & Governance – Member
• Environment, Safety and Social Responsibility – Member
Current external appointments:
• John Wood Group PLC – Non-Executive Chairman
• Kosmos Energy – Non-Executive Director
Page 110 of 273
CORPORATE GOVERNANCE
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 Company Purpose is set out on pages 112-113
• Division of responsibilities is set out on pages 113-114
• Composition, Succession and Evaluation is set out on page 114
• Audit, Risk & Internal Control is set out on page 115
• Remuneration is set out on page 115
We also set out our governance structures to consider the impact our business has on climate change
in line with the recommendations of the Task Force on Climate-related Financial Disclosures (“TFCD”).
Attendance
Type and number of meetings held during the year:
Board
(11)
Audit &
Risk (8)
Remuneration
& Talent (6)
Nomination &
Governance (2)
Environment,
Sustainability &
Social
Responsibility (2)
11
11
11
11
11
11
11
11
11
1
-
-
-
8
-
-
8
8
8
-
6
-
-
6
-
-
-
6
-
-
2
-
-
-
2
2
-
2
-
1
-
-
-
-
2
2
2
-
-
0
Director
Karen Simon
Mathios Rigas
Panos Benos
Andrew Bartlett
Robert Peck
Efstathios
Topouzoglou
Amy Lashinsky
Kimberley Wood
Andreas Persianis
Roy Franklin87
The Board has a formal schedule of matters that can only be decided by the Board, and this schedule is
reviewed by the Board on an ad-hoc basis.
The key matters considered by the Board in 2021 were:
HSE performance
Approving the Group 2022 budget
Acquisition of Kerogen’s 30% stake in Energean
Israel Limited and approval of SPA
Group strategy in light of the increased focus on
ESG matters
Strategic decisions on capital expenditure
Board composition
87 Appointed in October 2021, the number of possible Board meetings Mr. Franklin could have attended was 2, the number of
Nomination & Governance meetings was 1 and the number of ESSR Committee meeting was zero.
Page 111 of 273
CORPORATE GOVERNANCE
Appointments to the Board
Review of related party transactions
Reviewing the results of the employee survey and
agreed upon action items.
Review of risk register and a deep dive into
risk management
Company’s performance in light of COVID-19
including the safety of employees
Material contracts
Reviewing and approving the financial
statements for the 2020 year-end and 2021
half year
Financial reporting and controls
Material litigation
Compliance with statutory and
regulatory obligations
Significant transactions
Internal controls and risk management
Delegations of authority
Executive remuneration
Taking Final Investment Decision on the
investment into the Prinos asset.
Taking Final Investment Decision for Israel
growth projects
Reviewing of Greek and Italian assets and
capital allocation
Receiving updates on the Group’s activities in
carbon capture and blue hydrogen
Monitoring of progress against
environmental commitments
Board leadership and Company’s purpose
The Board’s primary role is to promote the long-term sustainable success of the Company and to ensure
that value is being generated for shareholders as well as contributing to wider society. This is carried out
through detailed reviews by the Board of the Company’s investment plans, funding plans, and corporate
social responsibility strategy. Details of the Company’s Corporate Social Responsibility commitments
and actions are found on pages 50-57. Details of the Company’s engagement with stakeholders is
detailed in the section 172 (1) statement on pages 118-121. As required by the Code, the Board is required
to consider and assess the risks the businesses face, and is assisted in this process by the Audit & Risk
Committee and the Company’s risk register is set out on pages 83-103. During 2021, the Board’s
composition and Committee structure was enhanced. The establishment of the Environmental,
Sustainability and Social Responsibility (ESSR) Committee means that a key pillar of the Company’s
strategy (sustainability and the commitment to net-zero by 2050) is assessed in a single forum that then
reports on its activities to the Board. For details on the ESSR Committee’s activities are found on pages
127-128. The sustainability of the Company’s business is considered further on pages 18-30 of the
Strategic Report. During the year Roy Franklin joined the Board as a Non-Executive Director, who brought
significant experience in the listed Oil & Gas sector and this experience is expected to facilitate delivery
in the
of the Company’s strategy to be the
East-Mediterranean.
leading exploration and production company
As part of the Company’s contribution to the wider society, the Board was again pleased to see the
progress that the Company has made during 2021 on its commitment to the UN’s Global Compact
campaign and pledge to net-zero emissions by 2050. Furthermore, the Remuneration & Talent
Committee again included targets to reduce emissions in the short-term and long-term bonus plans. This
now means that the majority of the incentive plans in the Company have targets relating to reducing
emissions. Furthermore this demonstrates the Company’s commitment to creating value through
sustainable development, taking into account the environmental aspects of its business. Further details
of activity in relation to protecting minimizing impact on the environment can be found on pages 20-29.
Following the acquisition of the Edison portfolio in December 2020, Energean has grown from a company
that produces 3,000 barrels of oil equivalent per day (boep/d) in 2019 to over 40,000 boep/d at the end
of 2021, also having gone from operations in one country to eight in the East Med and North Sea and
having made significant progress in reducing the carbon intensity of its operations (when measured
Page 112 of 273
CORPORATE GOVERNANCE
against the Kilograms of CO2 produced per boe) 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 64.
In June 2019, Robert Peck was appointed by the Board as the workforce Board representative. Employees
can confidentially email Mr. Peck to raise any issues, to the extent appropriate. 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. Further details on employee related matters are found on pages 56-64. The Board also
monitors the Company culture and includes culture related metrics in the Company’s annual bonus plan.
During 2021 these metrics included the successful integration of the ex-Edison business, and the roll out
of employee manuals and other key policies. Goals relating to culture are also included in the 2022 bonus
scorecard and the Board & Remuneration Committee will continue to monitor and track progress against
these objectives.
Each year the Company welcomes shareholders to its Annual General Meeting (“AGM”), which provides
a unique opportunity to ask questions to the Board. The results of the voting on each resolution proposed
to the meeting are published via the Regulatory News Service and through the Tel Aviv Stock Exchange
news service. Although the 2021 AGM was a closed meeting, due to the pandemic, the Company took
steps to ensure that shareholders were still able to ask questions, electronically. During 2022 we hope
that the AGM will return to its normal format with shareholders being able to ask questions in person.
At the 2021 AGM, the Company received less than 80% votes for the resolution no. 2 and no.3. Resolution
2 was an advisory vote on the Directors’ remuneration report and resolution 3 sought the approval of the
new Directors Remuneration Policy. The Company undertook a detailed review of feedback received on
these resolutions to ensure that it fully understood shareholders' concerns behind that vote. This review
included the Chair of the Remuneration & Talent Committee writing to and having follow up meetings
with shareholders. The Committee noted the feedback received in relation to the timing of the changes
to executive remuneration and shareholder views on the bonus performance metrics. The Committee
took these views on Board when making remuneration decisions in 2022. 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 and Remuneration & Talent Committee continue to engage with shareholders
on issues related to remuneration and looks forward to further engaging with shareholders and
stakeholders before the 2022 AGM.
Division of responsibilities
The Board currently comprises:
• The Chairman (who was independent upon her appointment)
• Two Executive Directors (Chief Executive Officer and Chief Financial Officer)
• One Non-executive Director (Efstathios Topouzoglou)
• Six independent Non-executive Directors.
The independence of Mr. Topouzoglou was tested against the criteria set out in Provision 10 of the Code.
Whilst he is considered to be independent in character and judgement, he is not deemed to be
independent by reference to the criteria set out in the Code, as a result of being a significant shareholder,
owning approximately 9.8% of the shares of the Company (as an individual and through his indirect
holdings in both Oilco Investments Limited and HIL Hydrocarbon Investments Limited).
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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 business. The Chairman and Chief Executive Officer share responsibility for the
representation of the Company to third parties. As detailed on page 111, the Board met eleven times
throughout the year, which is deemed to be sufficient, given the size and complexity of the
Company’s operations.
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 business’s 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 matter.
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 & Governance Committee oversaw the appointment of a new
independent non-executive Director, Roy Franklin, which further strengthened the independence of the
Board and added further technical skills to the Board skill set. Details of this appointment can be found
in the Nomination & Governance Committee report on pages 129-132. Roy also joined the Nomination &
Governance Committee and Environmental, Sustainability and Social Responsibility Committee.
In the second half of the year, as required by the Code, the Board underwent an internally facilitated
review, further details of which are contained in the Nomination & Governance Committee report on
pages 131-132. 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.
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 four years by the
end of 2021.
During 2022, the Board will carry out a further internal review as required by the Code, building on the
findings of the above-mentioned internally facilitated review. The results of that internal review will be
reported on in the 2022 Annual Report & Accounts as well as details on the plans for the externally
facilitated review that is scheduled to take place during 2023.
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Audit, risk and internal control
The Board established the Audit & Risk Committee upon admission to the London Stock Exchange, which,
during 2021, comprised Andrew Bartlett, Amy Lashinsky, Andreas Persianis and Kimberley Wood, all of
whom are Independent Non-Executive Directors. The Board is satisfied that Andrew Bartlett has recent
and relevant experience and that the Committee as a whole has competence relevant to the sector in
which the Company operates. The main roles and responsibilities of the Committee are set out in its
terms of reference, which are available to download at www.energean.com or available upon request
from the Company Secretary.
As part of its responsibilities, the Committee has formal and transparent policies in place to ensure the
independence and effectiveness of the internal and external audit functions and satisfy itself on the
integrity of the Company’s financial and narrative statements. The Audit & Risk Committee 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 125 and further details on the Risk
Management process is found on pages 79-82.
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 & Talent Committee as part of the admission process in March
2018. During 2021 the Committee members were Kimberley Wood, Karen Simon and Andrew Bartlett.
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 & Talent Committee to ensure their views are taken
into consideration.
The Committee has delegated responsibility for determining policy for Executive Director remuneration
and setting the 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 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.
At the 2021 AGM shareholders approved the new Directors Remuneration Policy and the Board and
Remuneration & Talent Committee spent a significant amount of time undertaking discussions with key
stakeholders as part of this approval. The actions taken by the Board in response to shareholders’
feedback on these matters is described on page 158.
The members of the Remuneration & Talent Committee are required to exercise independent judgement
and discretion when authorising remuneration outcomes, with regard to Company and individual
performance and wider circumstances. No Director is involved in deciding their own outcome; and when
discussing fees for the Chairman, Karen Simon will excuse herself from these discussions. Further details
of the role and activities of the Remuneration & Talent Committee and the Remuneration Policy are found
on pages 133-143 of this report.
Climate change
Board oversight
Energean sees climate change as a major global concern and a top priority for our business. This is
reflected in our strategy, and we apply all our governance processes to climate change-related issues.
Responsibility for the governance of climate change issues within Energean rests with the Board. To
reflect the increasing importance of climate change-related risks and opportunities, the Environment,
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Safety & Social Responsibility Committee has taken over responsibility for climate change and ESS
matters on behalf of the Board of Directors. The Board is also charged with reviewing investments for
climate-related risks (among other risks).
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 twice year and reviews the Board papers on Energean’s carbon emissions
performance and KPIs where possible when the Committee meets before a Board meeting.
In addition, the Audit & Risk Committee looks at climate change-related issues, to ensure the
identification of multi-disciplinary risks (including climate change-related risks), which may impact more
than one part of the Company. This Committee is responsible for ensuring that measures to mitigate and
adapt to the risks identified are effective and implemented as necessary.
The Remuneration & Talent Committee has responsibility for the annual directors’ bonus targets, long
term incentive plans, and the overall Remuneration Policy. Both the annual directors’ bonus targets and
the long-term incentive plans link executive bonuses to the achievement of emission reduction targets.
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 impact on Energean’s future financial performance.
The operational management of climate change issues is conducted by the HSE Director, who reports
directly to the CEO and provides updates to the Board on a regular basis. The HSE Director maintains and
oversees the development of Energean’s Corporate HSE and Climate Change Policy, defines appropriate
training programmes and drills for the entire Company to increase safety, environmental and climate
change awareness, and monitors technological developments and opportunities to help achieve defined,
appropriate climate change targets. The HSE Director is tasked with ensuring that the Company stays on
track to meet its net-zero 2050 target. The HSE Director oversees the monitoring of Energean’s carbon
emissions throughout all assets and defines the carbon emission factors that Energean’s financial team
uses to understand the financial impact of climate change on Energean’s portfolio. Furthermore, the HSE
Director assesses the climate risks and opportunities in cooperation with Energean’s financial, economic
and technical departments.
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Board – meets every 2 months (with ad-hoc meetings, as required) receives regular reports from HSE Director who attends meetings to present his report. Robert Peck provides updates on the ESSR Committee activities. Environment, Safety and Social Responsibility (“ESSR”) committee, chaired by Robert Peck (iNED), attended by Chairman of the Board, CEO, HSE Director. The Committee meets twice a year and receives reports from the HSE Director on climate issues and reports to the Board Executive Committee – Chaired by CEO, HSE Director also a member. Meets fortnightly, the HSE Director regularly updates on the Committee on climate change issues.
CORPORATE GOVERNANCE
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 such as Chapter Zero. 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.
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
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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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, and shareholders. The specific engagement with stakeholders on a day-to-day level is
delegated to the executive management team with the Board being kept up to date with the results of
this engagement and future plans. The Chairman of the Board and the Executive Directors routinely meet
with shareholders to discuss the strategic direction of the Company and the feedback from these
meetings is shared with the other Directors. Details of the Board’s engagement with the workforce is
found on page 118 of this report and details of the Board’s and Company’s engagement with local
communities is found on page 119 of this report.
Throughout the year the Board placed a high importance on stakeholder considerations and considered
these at the centre of its decision-making process.
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 requiring the Board to consider the long-term impact
of any decisions, especially in relation to reviewing the investment decisions in the Group’s portfolio of
assets. Examples of this decision making in action include the taking the final investment decision on the
Israel growth projects and the proposed transformation of the Prinos asset in Greece into “Green Prinos”
with plans approved for a carbon capture and storage project. For the Israel Growth projects the Directors
considered the Company’s wider growth plans and future ability to pay a dividend as well as enabling
Israel to use gas as a transition fuel to move away from coal. For the “Green Prinos” the Board considered
the vital role that carbon capture and storage will play in the Company’s sustainability plans and vital role
the facility will play in the region.
Engagement with:
Workforce
As required by the UK Corporate Governance Code, Robert Peck, an independent non-executive director,
was appointed by the Board in 2019 to be the “employee voice” in the boardroom. Similar to 2020, the
COVID pandemic unfortunately curtailed plans in 2021 for on-site visits to various Company locations by
Mr. Peck. These will be rescheduled when circumstances permit. However, Mr. Peck met informally with
mid-level managers and staff in Athens at the July board meeting and was briefed by team members
responsible for the roll-out of the Company's new on-line performance management platform. Earlier in
the year he participated in a virtual forum with Energean country managers to discuss the impact of the
pandemic on employees and morale. Mr. Peck also joined the Remuneration and Talent Committee as
an ex officio member where he participates in discussions related to the Company's work force.
As part of the 2021 bonus KPIs, the Executive Directors were set objectives relating to conduct and
culture. The Executive Directors were awarded a 93.2% pay-out on this metric following the successful
completion of the ex-Edison employees integration into the Energean business, which included the
integration of IT systems, a new office for employees in Milan and a roll out of the SAP success factors
system. Furthermore, significant progress was made in launching the employee manual and the
alignment of policies of the two businesses. 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 2022.
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Local communities
Energean is very active in the communities in which it operates (further information on this can be found
on pages 51-55), 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, we purchased and donated school supplies, classroom equipment, and stationery to 3
social institutions, 1 organisation and 3 schools, supporting over 500 students and their families in
need in Kavala and the Island of Thassos, Greece.
In Israel, we continued the support to three Paralympic swimmers in Israel in their journey and their
successful participation in the Tokyo 2020 Paralympic Games via monthly financial aid and social
media awareness. Our company has proudly supported these world champions for the last three
years in a row.
In Italy, in collaboration with “Caritas” (a Catholic organisation for charity), we donated school supplies
and stationery, helping a Charity Center and 50 families and their children in Chieti Province, Italy.
In Montenegro, we donated health and medical supplies to the nursing and supporting personnel of
the state owned “Komanski most”, a foundation that supports children, youth and adults with
moderate to severe mental or developmental disabilities.
In Egypt, we supported underprivileged families during Ramadan, by donating 200 food boxes to meet
essential needs in Meadia, the Abu Qir operations site location.
On June 5th 2021 (World Environment Day), Energean organised the following activities aligning with the
UN’s 2021 theme of “Ecosystem Restoration”:
•
•
•
•
In Greece we hosted a webinar on ecosystem restoration;
In Montenegro we funded and planted trees;
In Egypt we hosted webinars on biodiversity in the Mediterranean, organised a beach clean-up at
Meadia Beach, hosted a beach preservation session and also hosted environmental
awareness sessions;
In Israel we supported the production of education videos focusing on environmental preservation.
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During 2021, Energean collaborated with:
Globally:
United Nations Global Compact & United National Global Working Group Participation
In Greece:
Management body of the Nestos River Delta, Lakes Vistonida-Ismarida
and Thassos Island – Northeastern Greece
“Together for Children”, an association of NGOs in the field of child welfare
The Holy Diocese of Philippi, Neapolis and Thassos - Northeastern Greece
Democritus University of Thrace (DUTH), Department of Environmental Engineering
Association of Paraplegics and Disabled people of the Ileia Prefecture,
In Israel:
Maala, a non-profit, CSR standards-setting organisation in Israel, which has set a dedicated CSR
index on Tel Aviv Stock Exchange. Maala’s CSR Index is an ESG rating system used as an
assessment tool, benchmarking Israeli companies on their CSR performance. Energean was rated at
Gold Level, for a second year in a row, at the 2021 Maala ESG Index – Israel
The Jewish National Fund
The Regional Unit of Kavala
Etgarim, an NGO dedicated to the empowerment and social integration of people with disabilities
through outdoor sports - Haifa
Israeli Paralympic Committee.
The Nature and Parks Authority
“Living Room Memorial” (Zikaron BaSalon), a Holocaust Remembrance NGO
The University of Haifa and the Technion
Lev Chash” (“Feeling Heart”), a local NGO in Haifa
In Montenegro:
The Municipality of Bar – City of Bar
In Italy:
“Caritas Diocesana”, a Catholic organisation for charity - Chieti Province
The Italian Naval League
In Egypt:
Go Clean, a recycling solutions company
The American University of Cairo
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
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mailed to shareholders and to stakeholders who have an interest in the Company’s performance. The
Company responds to all requests for information from shareholders and maintains a separate Investor
Relations section within the existing www.energean.com website, as a focal point for all investor
relations matters. Moreover, there is regular dialogue with institutional shareholders via face-to-face
meetings, investor roadshows, RNS announcements, regular trading updates and conferences, as well
as general presentations that are published on the Company’s website. Furthermore, the Board is advised
of any 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.
At the 2021 AGM, the Company received less than 80% of votes in favour of resolution 2 & resolution 3,
which sought to approve the Remuneration Policy and the Directors Remuneration Report. The Company
carried 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
It is our policy to conduct all our business in an honest and ethical manner, and comply with all applicable
anti-bribery laws, including, but not limited to all applicable local laws where Energean operates and the
U.K. Bribery Act 2010, and to accurately reflect all transactions on Energean’s books and records.
We take a zero-tolerance approach to bribery and corruption and are committed to acting professionally,
fairly and with integrity in all our business dealings and relationships wherever we operate. We actively
monitor and manage risks from bribery or ethical misconduct, and we run an anti-corruption and anti-
bribery compliance program, actively overseen by the Board.
During the year, the Company continued to actively monitor and manage risks from bribery or ethical
misconduct and the due diligence process was extended to include assessments for compliance health
check on all our new customers to ensure that their internal policies meet the high standards that
Energean expects from its partners.
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Audit & 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 2021, which
sets out the role and work of the Committee during the year and key areas of focus for 2022. 2021 was
a busy year for the Committee as it assisted the Board with its financial reporting obligations for the
annual report, interim report and offering memoranda related to the issuance of two bonds. I would like
to thank my fellow committee members for their hard work and commitment throughout the year.
Membership of the Committee
The members of the Audit & Risk Committee during the year were myself, Andreas Persianis, Amy
Lashinsky, and Kimberley Wood (joined 1 January 2021).
The Board remains satisfied that the Committee has recent and relevant financial experience, and that
the Committee as a whole has sufficient experience of the oil and gas sector to meet the requirements
of the Code.
Furthermore, the Committee’s members are all Independent Non-Executive Directors, and therefore the
composition of the Committee complies with the Code. Committee members’ skills and experience are
documented on pages 106-110.
Any member of the Committee, the Company’s external auditor, or its internal audit manager may request
a meeting if he/she considers that one is necessary or expedient. No meetings of this nature were
requested during the financial year. The Committee met with the external auditor without management
present. The Chairman of the Board, CFO, external audit partner and internal audit manager attend
meetings by standing invitation; the Company Secretary acts as Secretary to the Committee.
Attendance at Meetings
The Committee met eight times during the year, and attendance at these meetings is set out below:
Director
Number of meetings during the year
No. of meetings attended:
Andrew Bartlett
Kimberley Wood
Amy Lashinsky
Andreas Persianis
8
8
8
8
8
8
8
8
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 any other formal announcements relating to the Group’s financial performance and
reviewing the Group’s accounting policies and significant financial reporting judgements;
• Reviewing the Group’s internal financial controls;
• Reviewing and monitoring the scope of the annual audit and the extent of the non-audit work
undertaken by the external auditors;
• Advising on the appointment, reappointment and removal of the external auditors and reviewing and
monitoring the external auditor’s independence and objectivity;
• Reviewing reports from the reserves auditor; and
• Reviewing the effectiveness of the internal audit, whistleblowing and fraud systems in place within
the Group. The Audit & Risk Committee considers annually how the Group’s internal audit
requirements shall be satisfied and makes recommendations to the Board accordingly, as well as on
any area it deems needs improvement or action. The Group’s internal audit manager has a standing
invitation to all committee meetings.
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• Assessing the effectiveness of the Group’s risk management and internal assurance processes. The
Audit & Risk Committee reviews the Group’s capability to identify and manage new types of risk and
keeps under review the Group’s overall risk assessment processes that inform the Board’s decision
making. In order to assist with achieving this, the Committee regularly liaises with the Company’s
compliance function.
The 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 there were no indicators of impairment at the year end. The Committee
reviewed the financial statement disclosures and was satisfied they appropriately conveyed the
judgements and estimates.
• 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 Committee considered the approach taken by the Company in relation to revenue recognition
following the acquisition of Edison E&P. The Committee reviewed the financial statements and were
satisfied that the requirements of IFRS 15 were satisfied.
The Committee also considered the approach taken by the Company in relation to accounting for
decommissioning and other provisions. Following the acquisition of Edison E&P the Company has taken
on additional decommissioning liabilities. The Committee reviewed the accounting treatment related to
a decrease in the estimated decommissioning costs for certain UK producing assets and agreed with
management’s conclusion that the carrying value of these assets should be reduced commensurately.
The Committee reviewed disclosures in the financial statements and were satisfied with the disclosures
on decommissioning provisions.
• The viability statement in the 2021 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 management’s going concern conclusion.
A requirement of the Code is that the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
This is the Group’s fifth 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.
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External auditors
Ernst & Young LLP (“EY” or the “External Auditor”) were appointed as auditors in 2018 and undertook their
first audit for the year ended 31 December 2017. Energean plc became a Public Interest Entity in 2018
on admission to trading on the London Stock Exchange. The Company must comply with section 494ZA
of the Companies Act 2006 and will be required to put the external audit contract out to tender by 2028.
The current lead audit partner is Andrew Smyth, who has been the lead partner since 2018. In compliance
with this regulation, the lead audit partner will rotate to Paul Wallek during 2022. 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 and estimates made by management and
their compliance with UK-adopted International Accounting Standards. The Audit & Risk Committee has
responsibility for the oversight of the external audit plan. This includes monitoring the independence and
objectivity of EY, the quality of the audit services and their effectiveness, the level of fees paid, approval
of non-audit services provided by EY and re-appointment. The Committee also met with the external
auditors without management present.
The Committee concluded that EY are independent and objective, operate at a high standard and have
recommended to the Board that the External Auditor be re-appointed at this year’s AGM for the financial
year ending 31 December 2022. 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 Revised Ethical Standard for
Auditors, published in December 2019. The Policy sets out those types of services that are strictly
prohibited and those that are allowable in principle (permissible services). Any service types are
considered by the Audit & Risk Committee Chairman on a case-by-case basis, supported by a risk
assessment prepared by management. This is reported by management to the Committee who consider
the services provided as part of concluding on the auditors independence.
The types of non-audit services provided by the auditor during 2021 were as follows:
• Tax certification services in Greece and Israel;
• Reporting accountant services in connection with the circular related to the acquisition of Kerogen’s
30% interest in Energean Israel Limited;
• Reporting accountant services in relation to the $450 million bond issuance in Q4 2021;
• Climate change and sustainability assurance services provided by EY Greece;
• Agreed upon procedures on Loan Covenants provided by EY Greece; and
•
Interim financial statements review.
In all these cases, safeguards were adopted and reasons given as to why these safeguards were
considered to be effective. The Committee was satisfied that the independence of the External Auditor
was not affected by the performance of any of these services. The non-audit services provided were
required by law and/ or are typically performed by the auditor. Furthermore, in each case there were
business justifications for using the External Auditor for non-audit services. The Chairman of the
Committee agreed with each justification before the service was carried out.
Further details on non-audit services are outlined in note 8g to the financial statements on page 214.
Interactions with the FRC
During the year in accordance with Part 2 of the FRC Corporate Reporting Review Operating Procedures,
the FRC carried out a review of the financial statements for the year ended 31 December 2020. In 2021
the FRC wrote to the company requesting further information on several areas. The Committee were
regularly updated on the correspondence between the Company and the FRC and commented on any
communication where appropriate. Following this engagement with the FRC the company undertook to
make certain additional disclosures in the financial statements for the year ended 31 December 2021.
The Committee was satisfied that these disclosures have been included in the financial statements.
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The FRC’s role is to consider compliance with reporting standards and is not to verify the information
provided to them. Therefore, given the scope and inherent limitations of their review, which does not
benefit from any detailed knowledge of the Group, it would not be appropriate to infer any assurance
from their review that our 2020 Annual Report and Accounts was correct in all material respects.
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 80-85. The Group’s
principal risks and uncertainties, which provide a framework for the Committee’s focus, are discussed on
pages 85-103. Management has identified the key operational and financial processes that exist within
the business and has developed an internal control framework. This is structured around a number of
Group policies and processes and includes a delegated authority framework. During the year the
committee assessed the key findings raised from internal audits conducted throughout the year and
undertook a number of “deep dives” including, inter alia, cyber security and insurance framework.
Internal auditors
PricewaterhouseCoopers Business Solutions S.A. (“PwC”), since January 2018 have been appointed as
the Group’s internal auditor. The Committee is currently reviewing the Company’s needs in this area, with
the main goal of increasing the efficiency of the internal audit function through the extension of the scope
of work with PwC and involvement of subject matter experts in specific audit engagements.
The internal audit function's key objective is to provide independent and objective assurance on risks and
controls to the Board, the Audit & Risk Committee and senior management, and to assist the Board in
meeting its corporate governance responsibilities. During the year the Company appointed an internal
resource to co-ordinate internal audit projects, align the internal audit risk assessment process with the
wider Board risk register reporting and facilitate communication between internal audit, the Audit & Risk
Committee, Senior Management and process owners.
The Audit & Risk Committee’s members meet regularly with the internal audit team and approve areas
that will be assessed by way of internal audit throughout the year. During the year, each internal audit
engagement was sponsored by an independent non-executive who was then responsible for approving
the relevant scope and objectives and oversaw the key aspects of the audit process.
The Audit & Risk Committee is responsible for the review and approval of the role and mandate of the
internal audit function, as reflected in the Internal Audit Charter, including the approval of the annual
internal audit plan, and monitoring the effectiveness of the function. Each report produced by the internal
auditor is presented in dedicated meetings with the Audit and Risk 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; and
• 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 three (2020: four) internal audits at a cost of $71,509 (2020: $60,906).
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
During the year the reserves committee met to discuss the Group’s reserves auditing process and
support the Audit & Risk committee in this area. Given his technical background and industry experience
Roy Franklin joined the reserves committee in November 2021. During 2022 the committee will receive
reserve reports from each country of operation and meet with their respective reserve auditors to assist
with the year-end reporting process.
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Fair, balanced and understandable assessment
The Committee advised the Board that in its view the 2021 Annual Report including the financial
statements for the year ended 31 December 2021, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess Energean’s position and
performance, business model and strategy. In making this assessment the members of the Committee
critically assessed drafts of this Annual Report including the financial statements and discussed with
management the process undertaken to make sure these requirements were met.
This included:
• Confirming that the contents of the annual report were consistent with information shared with the
Board during 2021 to support the assessment of Energean’s position and performance; ensuring that
consistent materiality thresholds are applied for favourable and unfavourable items
• Receiving reports from management at Board and Board Committee meetings that the information
contained within the Annual Report was considered to be fair, balanced and understandable; and
• Considering comments from the external auditor.
Other activities
Whistleblowing policy
The Group has a Whistleblowing policy in place and the Committee is responsible for overseeing the
arrangements and the effectiveness of the processes for this. The policy exists to enable employees to
raise any concerns in confidence about wrongdoing or impropriety within the Group. 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 committee was reviewed as part of the internal evaluation of the Board’s
effectiveness. In the previous annual report the committee set out its targets for 2021, namely,
• 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.
I am pleased to report that good progress has been made against these objectives with the successful
integration of the former Edison SpA companies, the finance function has recruited senior hires to assist
with the increased reporting obligations following the two bond issues during the year. Risk management
has continued to be a focus at the Committee and at the Board and deep dives have been carried out
into the risk management process and key risks that the business face. The Committee will continue to
monitor progress in these areas and advise on whether any further enhancements should be made.
Our priorities for 2022
• Further strengthen the Internal Audit process by using where appropriate sector specialists in relevant
topics in addition to PwC;
• Further develop in-house risk management reporting and awareness; and
• Follow up internal audits on acquired subsidiaries now that integration has been completed with a
focus on cyber security and insurance optimisation.
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
23 March 2022
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Environment, Sustainability
and Social Responsibility Committee
Robert Peck, Chairman of Environment, Sustainability and Social Responsibility (“ESSR”) Committee
It is my pleasure to introduce the ESSR Committee Report for 2021, which sets out its composition, role
and activities during the year.
The ESSR Committee became effective on 1 January 2021, following the separation of the Nomination
& Environment, Social and Governance Committee into the ESSR Committee and the Nomination &
Governance Committee.
Membership
The members of the ESSR Committee throughout 2021 were myself (as Chair), Amy Lashinsky,
Efstathios Topouzoglou and Andreas Persianis. Roy Franklin joined the committee following his
appointment to the Board on 13th October 2021. The Company Secretary acts as secretary to
the Committee.
Meetings
The ESSR Committee met on 2 occasions during 2021 with attendance details set out below:
Director
Robert Peck
Andreas Persianis
Efstathios Topouzoglou
Amy Lashinsky
Roy Franklin88
Role of the Committee
Number of possible meetings
Number of meetings attended
2
2
2
2
0
2
2
2
2
0
The ESSR Committee plays a fundamental role in assisting the Board in reviewing the effectiveness of
the group’s policies and systems for managing health and safety risks, assessing the policies and
systems within the group for ensuring compliance with regulatory requirements and reviewing the
Company’s environmental strategy including KPIs. The Committee also reviews the Company’s annual
sustainability report and receives updates on the Company’s performance with key rating agencies.
Furthermore, the Committee receives updates from the Group’s HSE Director on Health, Safety and
Environmental matters and the Company’s Head of CSR for updates on the Company’s performance
against its CSR goals. The Committee also advises the board on safety, the environment including
climate change, and Energean’s overall sustainability performance.
To view the ESSR Committee’s terms of reference, please visit the Company’s website
www.energean.com.
Activities during 2021
Sustainability reporting
The Committee reviewed the progress being made on the publication of the Company’s annual
sustainability report covering 2020. The Committee received updates from the Head of CSR and reviewed
drafts of the report before publication, and the Committee Chair signed off on the publication of the report
on behalf of the Board.
88 Joined the Committee on 13 October 2021.
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Chapter Zero teach-in
The Committee received an informative teach-in from Dr. Carol Bell on the work carried out by “Chapter
Zero”. The presentation covered key themes in the oil & gas sector, an overview and analysis of targets
set by other listed companies, as well as investor expectations in relation to net-zero commitments .
Deep dive on HSE
The Committee conducted a deep dive into the work of the group HSE Department and received a
presentation from the HSE Director and the Head of HSE for Israel on this work. As part of this deep dive
the Committee reviewed the policies and systems for identifying and managing health and safety risks,
the structure, governance forums, roles & responsibilities and HSE challenges for the function. The
Committee also received an overview on the HSE procedures in place, the audit plan for any independent
audits to be carried out and emergency response and readiness.
Priorities for 2022
During 2022, the Committee will:
• Review sustainability reporting for 2021 and the plans for the reporting in 2022, this will include the
review of the Group’s Sustainability Report;
• Review of HSE-related measures and safety protocols for the FPSO in light of the Karish & Tanin pre-
start-up audit;
• Receive updates (and approve where appropriate) from the HSE Director on climate change
targets/measures for 2022, new initiatives and committee teach-in on Carbon Capture Storage
(CCS); and
• Carry out a deep dive on the planned Corporate Social responsibility (CSR) activities for 2023: review
of the CSR policy to ensure it responds to current business challenges and review the funding levels
post-Edison integration taking into account key priorities for the Company since the acquisition.
Robert Peck
ESSR Committee Chairman
23 March 2022
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Nomination & Governance Committee
Karen Simon, Chair of Nomination & Governance Committee.
It is my pleasure to introduce the Nomination & Governance Committee Report for 2021, which sets out
its composition, role and activities during the year.
The Nomination & Governance Committee became effective from 1 January 2021, following the de-
merger of the Nomination & ESG Committee.
In this report we will also set out the areas of focus for the new Nomination & Governance Committee
for 2022.
Membership
The members of the Nomination & Governance Committee throughout 2021 were myself (as Chairman),
Kimberley Wood, Robert Peck, Efstathios Topouzoglou and Roy Franklin (appointed on 13 October 2021).
The UK Corporate Governance Code (“Code”) recommends that a majority of Nomination Committee
members be Independent Non-Executive Directors and that the Chairman of the Board (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. This requirement was satisfied as I was considered
to be independent upon appointment as a Chairman, and Kimberley Wood, Robert Peck and Roy Franklin
are considered to be Independent Non-Executive Directors.
The Company Secretary acts as secretary to the Committee.
Meetings
The Nomination & Governance Committee met on 2 occasions during 2021 with attendance details set
out below:
Director
Karen Simon
Robert Peck
Stathis Topouzoglou
Kimberley Wood
Roy Franklin89
Role of the Committee
Number of possible meetings
Number of meetings attended
2
2
2
2
1
2
2
2
2
1
The Nomination & Governance Committee plays a fundamental role in assisting the Board in reviewing
the structure, size and composition of the Board, including providing advice to the Board on the retirement
and appointment of additional and/or replacement Directors. It is also responsible for reviewing
succession plans for the Directors,
including the Chairman and Chief Executive and other
senior executives.
To view the Nomination & Governance Committee’s terms of reference, please visit the Company’s
website www.energean.com.
Diversity
The Nomination & Governance Committee’s key area of responsibility is to ensure the composition of the
Board is appropriate for oversight of the strategic direction of the Group and this includes reviewing the
balance of skills and knowledge. The Nomination & Governance Committee recognises the benefits of
diversity in the boardroom and believes that a wide range of experience, backgrounds, perspectives, and
skills generates effective decision-making. As at 31 December 2021, the Board included three females,
representing 30% of the Board, which is slightly below the 33% target set by the Hampton-Alexander
89 Joined the Committee on 13 October 2021.
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CORPORATE GOVERNANCE
review; however the Company remains as one of the few companies in the FTSE 350 with a
female Chairman.
Senior management’s make-up at the year-end was 38% female v 62% male. Their direct reports are 27%
female v 73% male.
Time commitment of the Chairman
Karen Simon is also a Non-Executive Director of Aker ASA, an Oslo Stock Exchange-listed company and
Crescent Energy, a New York Stock Exchange-listed company. The Board believes that Karen has
adequate time available to devote to the Company. Karen was deemed to be independent on
appointment and was first appointed to the Board as an Independent Non-Executive Director in
November 2017. She has, therefore, only served four years out of a possible nine years.
Appointment of new Independent Non-Executive Directors
The Nomination & Governance Committee was pleased to recommend to the Board that Roy Franklin be
appointed as an independent Non-Executive Director. The appointment increased the percentage of
independent Non-Executive Directors (excluding the independent Non-Executive Chair) from 56% to 67%.
Mr. Franklin has over 45 years' experience as a senior executive in the oil and gas industry. Mr Franklin
has extensive experience as a non-executive director, further information on his experience can be found
on page 110. He is also Chair of international energy services group, John Wood Group PLC, and a non-
executive Director of Kosmos Energy.
Mr. Franklin was the non-executive Chairman of Energean Israel Limited until February 2021. Mr. Franklin
served as a shareholder representative for the 30% shareholder, Kerogen and was not remunerated by
the Company for his services. The Board does not believe that his independence was comprised as a
result of being a Director of a subsidiary of the Group as he was not acting on behalf of the Company but
on the behalf of an external shareholder. The Board is also of the view that Mr. Franklin’s character and
reputation further support the conclusion of independence. Mr. Franklin’s former role as Chairman of
Energean Israel Limited makes him uniquely placed to provide insight to the Board of Directors on the
company’s flagship project.
The Nomination & Governance Committee did not engage an external search firm for the appointment
of Roy Franklin, being satisfied that this was unnecessary, as an extensive pool of candidates had been
identified during previous searches and Mr. Franklin was one of them. .
Succession
The Nomination & Governance Committee keeps under review the succession plans for senior
management and has met with the CEO separately to discuss these plans further. There are no
anticipated changes to the make-up of senior management in the near future.
Induction
Following the appointment of Roy Franklin a number of meetings were set up for him 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.
Internal Board review
During the year myself and the Company Secretary met with each Director individually to carry out a
follow up review to Board evaluation that was carried out in late 2020. The findings of this review were
then reported back to a meeting of the Committee with all Directors in attendance. The Committee and
the Board were pleased to note that significant progress had been made against the external review.
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Furthermore during the year, and as highlighted last year’s report, we continued to implement the
recommendations from the externally facilitated board review. In the below table we provide an update
on this.
CORPORATE GOVERNANCE
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.
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.
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
Proposed Actions listed in the
2020 Annual Report
Status Update
This has been added to the
Board schedule for 2021.
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.
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.
Complete, during the
November Board the meeting
focused on strategic matters
and had a number of
external speakers
Complete.
Complete, the monthly calls
and separate NED sessions
have taken place and will
continue to do so.
In the NESG Committee Report
in the 2020 ARA we explained
how we have amended the
committee structure.
Complete.
The Board to consider a plan for
NED engagement with the
business and which areas could
be allocated to particular board
members to become familiar with.
The implementation of this
recommendation will be
carried out in the first
half 2021.
The implementation of this
recommendation remains
ongoing and the Board
continues to consider plans
in this area taking into
account Director’s skills. In
the Audit & Risk Committee
non-executive directors have
responsibilities for certain
areas and report to the
Committee on those areas.
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Outcome / Review
The Board to agree a set of board
objectives for 2021.
CORPORATE GOVERNANCE
Proposed Actions listed in the
2020 Annual Report
Status Update
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.
Complete, the Board
objectives are aligned to the
Company objectives and
decisions are taken with
these objectives in mind.
Performance against these
objectives is then discussed
by Non-executive Directors at
the end of each meeting.
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
2022 AGM.
Performance of the Committee
The performance of the Nomination & Governance Committee was assessed as part of the internal
review as mentioned earlier in this report.
Our priorities for 2022
• Continue to focus on board composition and to identify candidates with geographic, gender and
ethnic diversity;
• Look to right size the Board with an expected decrease in the overall number of Directors; and
• Review Committee Chairs/SID role and make adjustments where appropriate.
Karen Simon
Nomination & Governance Committee Chair
23 March 2022
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Remuneration Report
Energean Plc – Chair letter
Dear Shareholder,
During 2021, Energean delivered excellent operational and financial progress, reflecting the
transformational acquisition and full integration of Edison E&P. Record financial results were achieved,
with solid performance from existing assets contributing to a 50% pro-forma90 year-on-year increase in
revenue to $497 million, and a 90% pro forma91 year-on-year increase in Adjusted EBITDAX to
$212 million. Our flagship Karish development is targeting First Gas by Q3 2022, meaning Energean is
on-track to achieve >200kboe/d in the medium term.
In addition, in 2021, we further strengthened and de-risked our balance sheet by raising the largest ever
EMEA energy international high yield bond, and so remain fully-funded for all projects across our eight
countries of operation. This remarkable success means that the Board has been able to set a new
dividend policy.
I am very pleased the market has continued to recognise Energean’s strength. Since listing in 2018,
management has delivered a shareholder return in excess of 125% to the end of February 2022. This is
an exceptional achievement, and testament to the confidence investors have in our management team.
This contrasts with disappointing returns in the wider market. For example, the FTSE 350 Oil, Gas, Coal
index has seen an increase of less than 5% over the same period.
Energean’s success is not limited to commercial performance. Energean was the first UK E&P company
to set a net-zero carbon target in 2019 and has a clear goal to accelerate this as far as is possible. To
date, we have made great strides in recording, reporting, and reducing our Scope 1 and 2 carbon
emissions and are well on track to reduce our carbon intensity by over 85% by 2025 versus our base year
of 2019. In 2021, carbon intensity reduced to 18 kgCO2e/boe – a 19% decrease versus 2020 levels. This
industry leading approach to ESG has been recognised by the CFI, who last year awarded the company
with ‘Best ESG Energy Growth Strategy - Europe 2021’.
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. Our
CFO has raised the largest ever EMEA energy international high yield bond and ensured the company has
remained fully-funded for all projects across our eight countries of operation. Both of our executive
directors have demonstrated exceptional leadership in unlocking significant shareholder value through
targeted acquisitions and organic growth.
Outcomes in the year
Strong performance in the year has naturally fed through into the performance-related pay outcomes for
the executive directors. The Committee approved a vesting level under the annual bonus of 80% for both
directors. The Committee considered this vesting level appropriate, balancing strong performance in
integrating Edison, ensuring liquidity, developing production and progressing sustainability objectives.
However the out-turn also reflects the delay to Karish First Gas. While this delay to First Gas was outside
the control of the directors, being driven by the impact of COVID-19 delaying the completion of the FPSO,
this was nevertheless reflected in the scorecard, and the portion of the bonus based on delivering Karish
First Gas did not vest. Disclosure on achievement against the 2021 bonus scorecard is set out on
pages 146-151.
2021 was a somewhat anomalous year as two Long Term Incentive Awards vested during the year. This
reflects that, given the timing of the IPO, there was a 3-month delay in the 2018 award, which has resulted
in the out-turn for this first award being reported in this year’s single figure rather than last year’s. These
are the first LTIP awards that have vested since IPO. One award completed at the end of June 2021 and
vested at 77.9% of maximum. Another award vested at the end of December 2021 and vested at 72.8%
90 Pro forma revenue and adjusted EBITDAX are presented as if Edison E&P results were consolidated for the entire year; the
locked box date of the transaction was 31 December 2018 and therefore all economic results since that date accrue
to Energean.
91 As per above.
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CORPORATE GOVERNANCE
of maximum. While slightly different performance criteria applied to each award, the level of vesting
under both awards reflects strong shareholder returns across the performance periods. Full details on
both awards are set out on page 153.
This initial double-vesting has meant a significant increase in the single figure value for both directors.
This reflects the fact that single figure values in previous years did not include any LTIP awards. Given
the two LTIP award vestings, the single figure for 2021 is also likely to be higher than future single figure
values which will revert to the normal one LTIP vesting each year. As such, the 2021 single figure value
should not be seen as representative of the ongoing level of executive pay at Energean.
Policy review in 2021
Last year, Energean introduced a new Remuneration Policy. I was pleased with the feedback we heard
during the preceding shareholder consultation, and the support given by the proxy agencies and our
institutional shareholders at the AGM. I would like to thank all shareholders who gave their support last
year, as well as those who provided feedback during consultation.
Following the AGM vote we subsequently wrote again to our largest shareholders to invite their feedback
and also held a number of follow up meetings. We had discussion meetings and received feedback both
from those that supported and those that did not and details of the feedback received are set out on
page 158.
Remuneration in 2022
Executive Directors
As disclosed last year, as part of the Policy review, the Committee committed to reviewing the CEO’s
salary in 2022, reflecting that the CEO last year requested that he not be considered for a salary increase
given the societal context and ongoing uncertainty of COVID-19. The Committee was appreciative of this
gesture and committed to reviewing the CEO’s salary in 2022 instead. The CEO’s salary has remained
unchanged for the past four years since Energean listed on the London Stock Exchange in 2018. For
2022, the CEO has requested no increase to his base salary. The Committee has, however, recommended
a base salary adjustment for 2022 to £750,000 from £675,000. This will be applied retrospectively for
2022 only if First Gas has been achieved from our flagship Karish project during the year. This increase
reflects an annualised increase of 2.7% of base salary since 2018 and the uplift is aligned with the key
milestone of delivery of our flagship Karish project.
In 2021, we awarded a staggered compensation uplift to the CFO. As disclosed last year, the uplift was
contingent on continued strong performance through 2021. Shareholders welcomed the staggered
nature of the uplifts given they required the CFO to evidence strong performance across a longer period.
The Committee has considered the Company’s and the CFO’s performance in the last year and has
determined that it is appropriate for the second stage of the uplift to proceed. Evidence of the CFO’s
continued strong performance during the year includes the issuance of $450 million senior secured
notes, maturing in 2027, as well as the €100 million non-recourse project funding package backed by the
Greek State for the Epsilon project in Greece, all of which combined, further increased Energean’s near
term liquidity. As such, the second increase in salary to £600k and increase in bonus opportunity to 200%
of salary will apply for 2022.
A competitive, incentivising remuneration policy for senior management is important in delivering our
strategy. In turn, this secures the creation of shareholder value. As such, the Committee believes the
proposed changes to the remuneration framework will better position both the company and
shareholders for future success.
There will be no other changes to the remuneration structure for the Executive Directors aside from those
set out above. For 2022, we have reviewed our bonus scorecard to align this with priorities for the year
ahead. Both Executive Directors will also receive an LTIP grant in 2022, and the targets are in line with
last year’s award. Full details on the approach to remuneration in 2022 are provided on pages 141-143.
Chair fee
The Committee also reviewed the fees paid to the Chair in 2021. The Chair fee has not increased since
the company first listed in 2018, and Karen Simon became Chair in November 2019 on the same fee level
that was paid to Simon Heale, the previous Chair (£150,000). The Committee reflected on the significant
growth in the company over the period since listing, including the expanding operational footprint and
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geographic complexity of the Group, and determined that an uplift to the Chair’s fee was appropriate for
2022. The Chair’s fee will therefore be increased to £220,000.
This uplift rebalances the Chair’s fee to a level commensurate with the market value and complexity of
Energean. In reviewing the market positioning of the Chair’s fee, the Committee was also cognisant that
Energean is in the all-too-rare position for a UK-listed company in having a female Chair, meaning there
is an added responsibility on the Committee to ensure that Karen’s fee level is comparable with the fee
levels paid in the wider market.
NED fees
There will be no adjustments made to the NED ‘base fee’. Some adjustments have been made to the
Committee Chair fees to reflect the increased time commitments required.
Concluding remarks
In formulating the pay proposals for 2022, as well as approving pay outcomes for the year, the Committee
have been mindful of the experience of the wider workforce. Energean views its people, the Energean
family, as the foundation upon which our success is built. The Committee is therefore mindful of how
pay in the boardroom compares with pay across the organisation.
The bonus outcome for the Executive Directors cascades down the organisation, ensuring consistency
across the company in incentive outturns. More broadly, the Committee is also kept abreast of workforce
matters through provision of key management information, including gender pay gap data. We have a
dedicated workforce NED in Robert Peck, who acts as the ‘employee voice’ at board level. The Committee
is therefore confident that
in the context of the broader
workforce experience.
its pay decisions are appropriate
While the Committee recognises there continues to be a significant focus on executive pay in the wider
environment, the growth and returns generated by Energean over recent years have been substantial.
The Committee is committed to the principle of paying for performance, and therefore believe that the
pay proposals for 2022 are fair and reasonable.
Looking ahead, Energean is on a continued strong growth trajectory. 2022 will be an exciting year of
further growth and change, including delivering First Gas and the intention to pay our inaugural dividend.
The Committee believes these remuneration changes will support our clear strategy by continuing to
incentivise and reward our management team for market outperformance.
Kimberley Wood
Remuneration & Talent Committee Chair, Energean Plc
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Remuneration Policy
Set out below is a summary of our current Remuneration Policy (Remuneration Policy) for Executive
Directors, which was approved by shareholders at the 2021 AGM. A full version of the Policy is contained
in our 2020 Annual Report, available on our website at https://www.energean.com/investors/reports-
presentations/
Base salary
Purpose and link
to strategy
To appropriately recognise skills, experience and responsibilities and
attract and retain talent by ensuring salaries are market competitive.
Operation
Generally reviewed annually with any increase normally taking effect from
1 January although the Remuneration Committee may award increases at
other times of the year if it considers it appropriate.
The review takes into consideration a number of factors, including (but not
limited to):
• The individual Director's role, experience and performance.
• Business performance.
• Market data for comparable roles in appropriate
comparator businesses.
• Pay and conditions elsewhere in the Group.
Maximum Opportunity No absolute maximum has been set for Executive Director base salaries.
Any annual increase in salaries is at the discretion of the Remuneration
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.
Performance
Conditions
No performance conditions
Pension
Purpose and link to
strategy
Operation
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.
Typically payable as a cash allowance, however executives can also
choose to participate in a company pension scheme or receive payments
into a personal pension or a combination thereof.
Contributions are set as a percentage of base salary.
Post-retirement benefits do not form part of the base salary for the
purposes of determining incentives.
Maximum Opportunity
Pension contributions will be set in line with the average workforce
pension contribution (in percentage of salary terms).
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For 2022, 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
To provide market competitive benefits.
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 tax equalisation). Executive Directors are
entitled to reimbursement of reasonable expenses (including any tax
thereon). Executive Directors also have the benefit of a qualifying third-
party indemnity from the Company and directors' and officers'
liability insurance.
For the current Executive Directors, the maximum annual value of benefits
will be £48,000 (Mathios Rigas) and £25,000 (Panos Benos). For any
future Executive Director appointed during the lifetime of this
Remuneration Policy, the value of their benefits package would not exceed
£48,000. These totals exclude any expenses treated as taxable benefits by
tax authorities or tax equalisation benefits, should these be provided in
exceptional circumstances, or any one-off costs relating to recruitment,
loss of office or relocation.
Performance
Conditions
No performance conditions.
Annual Bonus
Purpose and link to
strategy
Operation
To link reward to key financial and operational targets for the forthcoming
year. Additional alignment with shareholders' interests through the
operation of bonus deferral.
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
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CORPORATE GOVERNANCE
dividends had been reinvested in Company shares on a cumulative
basis).
Maximum Opportunity
The maximum award that can be made to an Executive Director under the
annual bonus plan is 200% of salary.
Performance
Conditions
For 2022, both executive directors will receive a maximum opportunity of
200% of salary.
The bonus is based on performance against financial, strategic,
operational, ESG or personal measures appropriate to the individual
Executive Director assessed over one year.
The precise measures and weighting of the measures are determined by
the Remuneration 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 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.
Long Term Incentive Plan (LTIP)
Purpose
and link to strategy
To link reward to key strategic and business targets for the longer term
and to align executives with shareholders' interests.
Operation
Awards are usually granted annually under the LTIP to selected
senior executives.
Individual award levels and performance conditions on which vesting will
be dependent are reviewed annually by the Remuneration 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.
Page 139 of 273
Performance
Conditions
All LTIP awards granted to Executive Directors must be subject to a
performance condition.
CORPORATE GOVERNANCE
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.
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.
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.
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Annual Report on Remuneration
Unaudited information
Implementation of remuneration policy in 2022
This section provides an overview of how the Remuneration Committee is proposing to implement our
Remuneration Policy in 2022 for the Executive Directors.
Base salary
As detailed in the Chair’s Letter, last year, the CEO requested that he not be considered for a salary
increase. The Committee therefore committed to reviewing the CEO’s salary in 2022 instead. For 2022,
the CEO has requested no increase to his base salary, which has remained unchanged since 2018, when
Energean listed. The Committee has, however, recommended a base salary adjustment for 2022 to
£750,000 from £675,000. This will be applied retrospectively for 2022 only if First Gas has been achieved
from our flagship Karish project during the year.
In 2021, we awarded a staggered compensation uplift to the CFO. The uplift was contingent on continued
strong performance through 2021. Shareholders welcomed the staggered nature of the uplifts given they
required the CFO to evidence strong performance across a longer period. The Committee has considered
the Company and the CFO’s strong performance in the last year and has determined that it is appropriate
for the second stage of the uplift to proceed. As such, the second increase in salary to £600,000 will apply
for 2022.
Salary (retrospectively from
First Gas)
Mathios Rigas (CEO)
£750,000
Panos Benos (CFO)
-
Pension
Salary
1 January
2022
Salary
1 January
2021
£675,000
£675,000
£600,000
£525,000
%
increase
11%92
14.3%
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
As detailed in the Chair’s Letter, an uplift in the bonus opportunity for the CFO was also proposed last
year subject to his continued strong performance across the year. Given the CFO’s continued strong
performance, the annual bonus plan for 2022 will offer a maximum bonus opportunity of 200% annual
salary for both of the Executive Directors. One-third of any bonus earned will continue to be deferred into
DBP shares.
As outlined in the Remuneration Committee Chair’s Statement, the annual bonus for 2022 will be
determined by a restructured bonus scorecard that is aligned with strategic priorities for the year ahead.
92 Conditional on achieving First Gas.
Page 141 of 273
Performance measure
CORPORATE GOVERNANCE
As a percentage of
maximum bonus
opportunity
Operational goals (including goals relating to projects, production, cost
of production and reserves/ resources)
45%
Commercial goals (including goals relating to gas contracting and
portfolio rationalisation)
Financial and Risk goals (including goals relating to the dividend policy,
liquidity, and risk strategy)
Sustainability (including goals relating to climate change, HSE and
Diversity and Inclusion)
15%
20%
20%
The targets for these performance measures in relation to the financial year 2022 are deemed
commercially sensitive. However, it is envisaged that 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 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 Committee has discretion, where it believes it to be appropriate, to override any
formulaic outcome arising from the bonus plan.
Long-term incentive plan
The Executive Directors will receive an award under the LTIP during 2022 over shares worth 200% of
annual salary applicable for year. Awards will vest three years after grant and be subject to an additional
two-year holding period. The proposed performance measures for the 2022 award are consistent with
the measures for the 2021 award, and are set out below.
Performance measure
Relative Total Shareholder
Return over 3 Financial Years
Absolute Total Shareholder
Return over 3 Financial Years
Average Scope 1 &2 CO2
emissions (kgCO2 / boe) over
3 Financial Years
Proportion of
award determined
by measure
Threshold
Performance
Maximum Performance
50%
30%
20%
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, Capricorn Energy PLC (formerly
Cairn Energy), Tullow Oil plc, Diversified Oil & Gas plc, Jadestone, Serica, Seplat, Genel and the FTSE 350
Oil and Gas and Coal index. This is aligned with the peer group that applied for the 2021 LTIP award.
The Committee reflected on the targets that would apply for the 2022 LTIP award and considered that
the targets that applied for the 2021 award continue to be appropriate. For the TSR metrics, the
Committee recognised that strong share price performance over recent months means there is a strong
‘base effect’ that means strong outperformance will need to be maintained to generate a payout under
the incentive. For the emissions reduction target, these targets are regarded as stretching in the context
of the company’s ESG strategy.
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CORPORATE GOVERNANCE
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
The table below shows the fee structure for Non-Executive Directors for 2022. As detailed in the Chair
letter, Committee reviewed the fees paid to the Chair in 2021. The Chair fee has not increased since the
company first listed in 2018, and Karen Simon became Chair in November 2019 on the same fee level as
the previous Chair. The Committee reflected on the significant growth in the company over the period
since listing, including the expanding operational footprint and geographic complexity of the Group, as
well as the increasing complexity and time commitment of the role, and determined that an uplift to the
Chair’s fee was appropriate for 2022.
There will be no adjustments made to the NED ‘base fee’. Some adjustments will be made to the
Committee Chair fees to reflect the increased time commitments required. 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.
Chair of the Board all-inclusive fee
Basic Non-Executive Director fee
Senior Independent Director additional fee
Audit Committee Chair additional fee
Nomination & ESG Committee Chair additional fee
Remuneration Committee Chair additional fee
Audited information
2022 fees
2021 fees
£220,000
£150,000
£55,000
£10,000
£25,000
£15,000
£15,000
£55,000
£10,000
£5,000
£5,000
£5,000
The information provided in this section of the Remuneration Report up until the ‘Unaudited information’
heading on page 155 is subject to audit.
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Single total figure of remuneration
The following table sets out the total remuneration for Executive Directors and Non-Executive Directors for 2021 with comparative figures for 2020.
2021 (£ ‘000)
2020 (£ ‘000)
Salary
and
fees
Pension93 Benefits93
Annual
bonus94 LTIP95
Total
Fixed
Total
Variable Total96
Salary
and
fees
Benefits
Annual
bonus
Total
Fixed
Total
Variable Total96
Executive Directors
Mathios Rigas
Panos Benos
675
525
27
21
48
25
1,080
2,635 750
3,715
4,465
675
735
1,680 571
2,415
2,986
450
75
50
858
572
750
500
858
572
1,608
1,072
Non-executive Directors97
Karen Simon
150
Andrew Bartlett
68.125
Robert William
Peck
Stathis
Topouzoglou
58.75
53.75
Amy Lashinsky
53.75
Kimberley Wood
60
Andreas Persianis 55
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150
68.125
58.75
53.75
53.75
60
55
-
-
-
-
-
-
-
150
150
68.125 63
58.75
55
53.75
50
53.75
60
55
50
26
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150
63
55
50
50
26
24
-
-
-
-
-
-
-
150
63
55
50
50
26
24
93 Pension/ Benefits – In 2021, Mathios Rigas and Panos Benos received a pension allowance worth 4% of salary (equivalent to the wider workforce) and a separate benefits allowance. This approach
replaced a contractual benefits package paid in 2020 worth £75,000 p.a. and £50,000 p.a. respectively.
94 Annual bonus – bonus payments are paid two-thirds in cash and one-third in deferred shares. Deferred shares vest after two years. Details of the performance measures and targets are set out in
the following section.
95 LTIP – this figure includes two Long Term Incentive awards that completed in 2021. One award vested in June 2021 and one award completed in December 2021. The first LTIP vested in June 2021
and vested at 77.9% of maximum. For this award, £434k and £289k is related to share price appreciation between the grant and vesting date in September 2021 for the CEO and CFO respectively.
The second LTIP completed in December 2021 and will vest at 72.8% of maximum and the value provided in the single figure is based on an estimated share price based on a Q4 (1 October – 31
December 2021) average (£8.91). For this award, an estimated £167k and £100k is related to share price appreciation between the grant date and vesting date for the CEO and CFO respectively.
96 Total remuneration paid to Directors in respect of 2022 is £7,962,346 (2021: £3,130,000).
97 Non-executive directors - Roy Franklin joined the board on 13 October 2021.
Page 144 of 273
Roy Franklin
11.971
Ohad Marani98
-
-
-
-
-
-
-
-
--
11.971
-
-
-
11.971
-
-
-
-
-
-
-
-
32
-
-
-
32
CORPORATE GOVERNANCE
98 Stepped down on 26 July 2020.
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Annual bonus
The maximum annual bonus opportunity for the Executive Directors in 2021 was 200% of salary for the
CEO and 175% of salary for the CFO. 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 2021 annual bonus, along with performance
achieved, are set out below. Further detail on the respective areas of performance follows the summary
table.
Performance Measure
% of maximum
Performance achieved
Operational goals
Commercial goals
Financial and Risk goals
ESS goals
People and Culture goals
Total
50%
10%
20%
15%
5%
100%
31.3%
9.5%
19.8%
14.8%
4.7%
80%
Further detail on the various performance areas of the annual bonus is set out below.
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Operational goals
Operational goals accounted for 50% of the overall bonus. Principally goals set for this segment have defined threshold, target and maximum performance levels
attached, which are disclosed below. The goals for this segment related to achieving First Gas, other project progress, absolute production and cost of production
targets, adding resources from Glengorm, and wider reserves growth.
Performance
measure
Proportion of
bonus
Threshold
performance
0% vesting
Target performance
50% vesting
Maximum
performance
100% vesting
Actual performance
% of maximum
bonus payable
Operational goals
Deliver First
Gas Karish
15%
FPSO Sail Away
FPSO in Israel
Hook Up
No sail away due to
COVID-19 delays
0%
Project Progress
5%
Goals relating to operational progress, including NEA-NI development, Karish North
development, and development of a second Oil Train. Progress was weighted based on
overall project cost. Committee approved an outcome of 70%, reflecting hold-ups on
some projects, including the FPSO, but good overall progress on other projects.
3.5%
(70% of element vesting)
Production
11.25%
35k boep/d
37.5k boep/d
40k boep/d
41 kboep/d
Cost of Production
11.25%
$17 per barrel
$15.5 per barrel
$14 per barrel
$14.3 per barrel
11.25%
(100% of element vesting)
10.9%
(97% of element vesting)
Reserves adds from
Glengorm (adjusted
for UK Sale)
1.9%
33.7mmboe
63.5mmboe
70mmboe
Neither well was
successful
0%
Reserves growth
5.6%
190 mmboe
210 mmboe
245 mmboe
253.3 mmboe
5.6%
(100% of element vesting)
Performance within the operational category therefore was assessed at 31.3% out of the maximum 50% available.
For the ‘Project Progress’ sub-category, the Committee assessed constituent target ranges within the overall sub-category to come to an overall result for the 5%
available. A target range had been set within this sub-category in relation to development of a second oil train. Given the FPSO delay, it was decided to slip the
delivery date of this module backward to align it with the Karish North installation, and the target range on the second oil train development was therefore revised
to align with the revised overall project schedule. The Committee approved an overall outcome of 70% for the project progress sub-category, recognising strong
progress across projects, but factoring in some discount for the delay associated with the FPSO hold-up.
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CORPORATE GOVERNANCE
Commercial goals
Commercial goals accounted for 10% of the overall bonus. 5% linked to a strategic goal of optimising the portfolio, while the balancing 5% linked to a quantitative
ratio of contracted sales to reserves target.
Performance
measure
Proportion of
bonus
Threshold
performance
0% vesting
Target performance
50% vesting
Maximum
performance
100% vesting
Actual performance
% of maximum
bonus payable
Commercial goals
Successful
Divestments and
Optimisation of
Portfolio
5%
Ratio of contracted
sales to reserves
5%
The Committee considered this sub-category on a holistic basis. Successful divestment/
optimisation actions included acquisition of ENI shares in Vega/Rospo for no
consideration, enabling a 50% increase in oil production; developing a proceedable offer
for Glengorm; creation of an “Adriatic package” to provide reference for Montenegro
DoD; and conducting a ground-up review of the Italian operation, including
recommendation for disposal. The Committee approved an outcome of 90% for
this element.
90%
95%
100%
100%
4.5%
(90% of element vesting)
5%
(100% of element vesting)
Performance within the commercial category therefore was assessed at 9.5% out of the maximum 10% available.
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CORPORATE GOVERNANCE
Financial and Risk goals
Financial and Risk goals accounted for 20% of the overall bonus, split between quantitative targets relating to average li fe of group debt (worth 8% of the overall
bonus) and available liquidity (7%), and a discretionary category relating to development of a risk strategy (5%).
Performance
measure
Proportion of
bonus
Threshold
performance
0% vesting
Target performance
50% vesting
Maximum
performance
100% vesting
Actual performance
% of maximum
bonus payable
Financial and Risk
Weighted average
life of group debt
8%
3 years
4 years
5 years
5.4 years
Available liquidity
7%
$100 million
$150 million
$200 million
$1.04 billion
Develop a risk
strategy
5%
Successful initiatives included implementation of a new ERP system; updating all policy
manuals developed in 2018 and progress on new Enterprise Risk Management system.
The Committee recognised strong progress on this element and approved a vesting
outcome of 95%.
8%
(100% of element vesting)
7%
(100% of element vesting)
4.75%
(95% of element vesting)
Performance within the financial and risk category was therefore assessed at 19.8% out of the maximum 20%, principally due to a particularly strong performance
in raising liquidity, and extending the life of Group debt.
Page 149 of 273
Environment, safety and sustainability
Area of focus
Achievement
CORPORATE GOVERNANCE
Climate
Change
(10%)
• To reduce carbon emissions intensity.
The Committee set a target range of
3% reduction at threshold, 5% at target
and 8% at maximum.
• To mature the carbon capture/
storage project.
• To develop the Energean strategy
around transitioning to net-zero.
• To gain a strong sustainability rating
relative to the peer group. The
Committee set a threshold target of
coming in the top 50% of the peer
group, a target of coming in top 25% of
peer group and max of top 15% of
peer group.
• To include climate change
requirements in company's suppliers'
selection and evaluation policy
Health
and
Safety
(5%)
• Overall HSE Performance against
annual plan, including performance
against LTIF and TRIR targets.
• To align all countries’ HSE
Management Systems (MS) with the
Group HSE MS including reporting &
internal audit by implementing a
digital solution
• Strong performance on 2021 carbon
emissions intensity reduction -
successfully reduced from
22.2kg/COe/boe to 18.3gCO2e/boe,
meaning a reduction of c.18% vs. a max
target range of 8%.
• Prinos carbon capture project proposal
submitted to Greek government. Project
approved and currently progressing
required milestones.
• Strategy and net-zero transition plan
successfully developed and submitted
to the Board.
• Sustainability rating vs. peers – MSCI
ESG rating at AA level (score of 5.6 well
above 4.7 previous score, and 4.6
industry average score). Energean at top
of peer group, with other 5 E+P
companies rated below AA. In overall
E+P sector, only 13% in AAA level and
another 13% at AA level with Energean.
• New Climate Change Policy and new
contractors HSE Policy has been issued,
and new selection and evaluation
rules agreed.
• Well-below LTIF and TRIR 2021 targets
(includes employees and contractors) –
LTIF of 0.42 in 2021 (vs. <0.65 target)
and TRIR of 0.97 (vs. <1.3 target).
• Successfully aligned HSE management
systems, including roll-out of new HSE
management software.
Performance within the environment, safety and sustainability category was therefore assessed at 14.8%
out of the maximum 15%, reflecting strong performance against pre-set climate change and health and
safety objectives.
People & culture
Area of focus
People
and
Culture
(5%)
• Edison integration – Fully completed by
end of 2021, including ICT, system
integration, new office in Milan, SAP
Success Factors roll out.
• Employee Manual – Launch the
Employee Manual, aligning all policies
with Edison by end of 2021
• Culture Survey - Proposal to run the
GRID survey close to year end,
reflecting one year since
Edison transaction.
Achievement
• Successfully progressed Edison
integration, including development of
new organisational chart, signing of
new contracts, progression on
integration of (IT) systems and
completed move to new offices in
Milan.
• Progressed on -boarding initiatives,
including development of employee
manual ready to be launched Q1 2022.
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CORPORATE GOVERNANCE
• Culture survey has been planned and is
ready to launch, with launch expected in
Q1 2022.
Overall, the Committee approved a vesting outcome of 4.7% out of the maximum 5% on the People and
Culture element of the bonus. This was to reflect very strong performance on Edison integration, with a
discount applied to reflect the slight delay to the roll-out of the culture survey.
Overall outcome for the 2021 annual bonus
The overall outcome on the annual bonus was therefore:
Total bonus payable
% of maximum
Total bonus payable
£’000 and % of annual salary
Mathios Rigas
80.0%
Panos Benos
80.0%
£1,080,000
(160% of salary)
£735,000
(140% of salary)
The Remuneration Committee considered this bonus outcome in light of the Group’s overall financial and
operational performance during 2021 and was satisfied that it was appropriate and that no discretionary
adjustment to the outcome was required.
LTIP awards vesting in the financial year
2021 was an anomalous year as two LTIP awards vested during the year. This is related to the company’s
IPO date – as one award was granted at the point of the company’s IPO in mid-2018, and another was
granted at the start of the 2019 performance year, two awards completed during 2021. This has had the
effect of significantly increasing both directors’ single figure value. Given the inclusion of two awards in
the single figure disclosures, it means they should not be seen as representative of the likely level of
executive pay going forward.
July 2018- June 2021 award
The share award granted after the company listed in June 2018 was subject to performance measured
between 1 July 2018 and 30 June 2020. The value of this award is set out below.
Number of
shares awarded
Mathios Rigas
252,904
Panos Benos
168,602
Value at
award date
£1,350,000
£900,000
Number of shares
vesting99
Value at vest100
196,986
131,324
£1,485,274
£990,183
99 The vesting figures shown in the table above reflect the 77.89% of the total award that met performance conditions on 30 June
2020, and that vested on 6 September 2021. The vesting shares will become exercisable after a two-year holding period on 5
September 2023.
100 The share price used to value the shares is the share price on the vesting date of 6 September 2021 (£7.54). This compares to
a grant price of £5.34. The portion of the award that is attributable to share price growth is: for Mathios Rigas: £434k and for
Panos Benos: £289k.
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CORPORATE GOVERNANCE
The performance conditions101 that applied to this award are set out below.
Threshold
Maximum
Weighting
25% vesting
100% vesting
Performance
achieved
Pay-out level
% of maximum
70%
Median
Upper quartile
1st in peer group 100%
Relative
TSR102
Absolute TSR
10%
12.5% p.a.
20% p.a.
17.9% p.a.
78.93%
Karish-Tanin
First Gas
20%
30 June 2021 31 March 2021 Not reached
0%
Strong TSR performance meant the award vested at 77.89% of maximum. Unfortunately, the First Gas
date was missed, meaning this portion of the award lapsed in full. When considering performance
outcomes, the Committee looks beyond formulaic results to ensure the outcomes align with overall
business performance. The Committee considered the holistic performance of the business and decided
that the formulaic outcome was an appropriate one, and reflective of the shareholder and stakeholder
experience. It therefore decided that the award should vest without any further adjustment.
January 2019- December 2021 award
The share award granted at the start of the 2019 financial year was subject to performance measured
between 1 January 2019 and 31 December 2021. The value of this award is set out below.
Number of
shares awarded
Value at
award date
Number of
shares vesting103
Value at vest104
Mathios Rigas
177,309
£1,350,000
129,063
£1,149,951
Panos Benos
106,385
£810,000
77,437
£689,964
101 Straight-line vesting applies for all performance conditions.
102 Companies included in the relative TSR peer group: Capricorn Energy (Cairn Energy), EnQuest, Genel Energy, Gulf Keystone
Petroleum, Hurricane, Isramco Negev, Kosmos Energy, Nostrum Oil & Gas, Ophir Energy, Premier Oil (Harbour Energy), Ratio,
Rockhopper Exploration, Seplat Petroleum, SOCO International (Pharos Energy), Tamar Petroleum and Tullow Oil.
103 The vesting figures shown in the table above reflect the 72.79% of the total award that met performance conditions on 31
December 2021. This award will vest on 28 March 2022. The vesting shares will become exercisable after a two-year holding
period on 28 March 2024.
104 The share price used to value the shares is the 3-month average share price on 31 December 2021 (£8.91). This compares to
a grant price of £7.61. The portion of the award that is attributable to share price growth is: for Mathios Rigas: £168k and for
Panos Benos: £101k.
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CORPORATE GOVERNANCE
The performance conditions105 that applied to this award are set out below.
Threshold
Maximum
Weighting
25% vesting
100% vesting
Performance
achieved
Pay-out level
% of maximum
55%
Median
Upper Quartile
1st in peer group 100%
Relative
TSR106
Absolute TSR
20%
12.5% p.a.
20% p.a.
13.9% p.a.
38.94%
Karish Tanin
First Gas
Production –
average over
3 years
15%
30 June 2021 31 March 2021 Not reached
0%
10%
8,000 bpd
12,000 bpd
15,366 bpd
100%
Strong TSR performance meant the award vested at 72.79% of maximum. Unfortunately, since the same
First Gas target applied to the 2019 grant as applied in the 2018 grant, this portion of the award lapsed
in full. The performance level achieved for average production over three years includes production from
Edison assets. This transaction completed in December 2020. The Committee considered the holistic
performance of the business and decided that the formulaic outcome was an appropriate one, and
reflective of the shareholder and stakeholder experience. It therefore decided that the award should vest
without any further adjustment.
LTIP awards during the financial year
An award was granted under the LTIP to selected senior executives, including the Executive Directors, in
March 2021. This award is subject to the performance conditions described below and will vest in March
2024 with a subsequent two-year holding period for any vested shares to March 2026. The Committee
considered the share price at the time of grant, recognising the need to mitigate the risk of windfall gains.
Type of
award
Date of
grant
Maximum
number of
shares107
Face value
(£)
Face
value
(% of
salary)
Mathios
Rigas
Conditional
share
award
Panos
Benos
26
April
2021
26
April
2021
167,410
£1,350,000
200%
111,607108 £1,050,000
200%
Threshold
vesting
End of
performance
period
25% of
award
31 December
2023
105 Straight-line vesting applies for all performance conditions.
106 Companies included in the peer group: Cairn Energy (Capricorn Energy), EnQuest, Genel Energy, Gulf Keystone Petroleum,
Hurricane, Isramco Negev, Kosmos Energy, Nostrum Oil & Gas, Ophir Energy, Premier Oil (Harbour Energy), Ratio, Rockhopper
Exploration, Seplat Petroleum, SOCO International (Pharos Energy), Tamar Petroleum and Tullow Oil.
107 The maximum number of shares that could be awarded has been calculated using the share price of £8.06 (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.
108 The maximum number of shares granted to Panos Benos should have been 130,208 (200% x £525,000 (2021 salary) ÷ £8.064).
However, due to an administrative error, the number of shares actually granted in April 2021 was only 111,607. To address this,
the outstanding 18,601 shares will be granted in March / April 2022 and will be subject to the same vesting conditions as the
original grant.
Page 153 of 273
CORPORATE GOVERNANCE
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 period109
Absolute Total Shareholder
Return over three-year
performance period
Average Scope 1 & 2 CO2
emissions (kgCO2 / boe) over
3 Financial Years
Proportion of
award determined
by measure
Threshold
Performance
Maximum
performance
50%
30%
20%
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
Loss of office payments/payments to former directors
There have been no payments to former Directors or payments to Directors for loss of office during 2021.
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 2021 is set out below:
Number of shares as at 31 December 2021
Shares owned
outright
Interests in
share
incentive
schemes,
subject to
performance
conditions
LTIP111
19,826,292
493,025
Interests in
share
incentive
schemes,
subject to
employment
Percentage of
Issue Share
Capital
(minus LTIP
and DBP
shares)
Share
ownership
guidelines
met?110
DBP112
66,322
11.16
3,418,999
328,684
44,215
1.93
198,072
5,554
0.11
0.003
Yes
Yes
n/a
n/a
Director
Mathios
Rigas
Panos
Benos
Karen
Simon
Andrew
Bartlett
109 Total Shareholder Return performance will be measured against the following peer group: AkerBP, Lundin, Delek Drilling,
Isramco, Tamar , Ratio, Kosmos, Harbour Energy, Capricorn Energy PLC (formerly Cairn Energy), Tullow Oil plc, Diversified Oil
& Gas plc, Jadestone, Serica, Seplat, Genel and the FTSE 350 Oil and Gas and Coal index.
110 For the purposes of determining the value of Executive Director shareholdings, the individual’s current annual salary and the
share price as at 31 December 2021 has been used (£8.55 per share).
111 This relates to shares awarded under the LTIP in March 2020 and March 2021.
112 This relates to shares awarded under the DBP in March 2020 & 2021 in relation to the 2019 & 2020 annual bonus.
Page 154 of 273
Robert
William Peck
Efstathios
Topouzoglou
6,755
17,623,314
Amy Lashinsky 1,507
Kimberley
Wood
Andreas
Persianis
Roy
Franklin
0
0
0
CORPORATE GOVERNANCE
n/a
n/a
n/a
n/a
n/a
0.004
9.92
0.0008
n/a
n/a
n/a
Between 31 December 2021 and 23 March 2022, Efstathios Topouzoglou sold 656,234 shares held in his
own name.
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 2021 to the performance of the FTSE 350 Oil, Gas and Goal 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.
Page 155 of 273
a n Sep ec a n Sep ec a n Sep ec a n Sep ec Ene ean SE il as oal n e
CORPORATE GOVERNANCE
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.
CEO single figure of remuneration
£’000
Annual bonus pay-out
(as a % of maximum opportunity)
2021
2020
2019
2018
£4,465k
£1,608k
£1,134k
£1,581k
80.0%
84.8%
37.9%
82.1%
LTIP vesting out-turn
(as a % of maximum opportunity)113
75.4%
n/a (no
award
vested in
2020)
n/a (no
award
vested in
2019)
n/a (no
award
vested in
2018)
Percentage change in remuneration of the board of directors
The chart below shows the percentage change in annual salary, benefits and bonus for each Executive
and Non-Executive Director compared with the average for all Company employees between 2020
and 2021.
Annual percentage change table
Salary
change
(2020 to
2021)
Benefits
change
(2020 to
2021)
Annual
bonus
change
(2020 to
2021)
Salary
change
(2019 to
2020)
Benefits
change
(2019 to
2020)
Annual
bonus
change
(2019 to
2020)
Average for all employees114
8.88%
16.13%
40.6%
6.2%
-8.70%
12.49%
Executive Directors
Mathios Rigas
Panos Benos
Non-Executive Directors
Karen Simon
Andrew Bartlett
Robert William Peck
Stathis Topouzoglou
Amy Lashinsky
Kimberley Wood
Andreas Persianis
Roy Franklin
0.0%
-36.0%
25.9%
0%%
16.7%
-50.0%
28.5%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
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%
-
Since Energean plc only has 36 UK employees, it is exempt from the legislative requirement to disclose
a ratio between the remuneration of the CEO and UK employees. However, the Committee continues to
monitor the approach to remuneration that applies to the wider workforce. Further detail on the
Committee’s approach to the wider workforce is set out in the wider workforce section on page 158
.
113 The 2021 LTIP value is an average based on two awards that completed in 2021. The 2018 LTIP award that completed in June
2021 vested at 77.9% of maximum. The 2019 LTIP award that completed in December 2021 vested at 72.8% of maximum.
114 Average employee pay has been calculated on a full-time equivalent basis based on all employees of Energean plc.
Page 156 of 273
CORPORATE GOVERNANCE
Relative importance of the spend on pay
The chart below illustrates the total expenditure on remuneration in 2020 and 2021 for all of the
Company’s employees compared to dividends payable to shareholders.
Total expenditure on remuneration
Dividends payable to shareholders/ share buybacks
2021 (£m)
2020 (£m)
Change
92.3
Nil
27.3
nil
236.6%
-
Consideration by the Directors of matters relating to Directors’ remuneration
The Remuneration Committee is chaired by Kimberley Wood. During the year, the Remuneration
Committee also comprised Andrew Bartlett and Karen Simon. Details of their attendance is set out on
page 111.
The Remuneration Committee met six times during 2021. Other attendees present at these meetings by
invitation were 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
Simplicity and
alignment to
culture
Predictability
Proportionality
and risk
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.
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.
Our executive remuneration arrangements contain maximum opportunity levels
for each component of remuneration with variable incentive outcomes varying
depending on the level of performance achieved against specific measures. The
charts within our Remuneration Policy as set out in the 2020 Annual Report and
Accounts provide estimates of the potential total reward opportunity for the
Executive Directors under our current Remuneration Policy.
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 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
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CORPORATE GOVERNANCE
remuneration. The Remuneration Committee also oversees the operation of all share plans. Full terms
of reference of the Remuneration Committee are available on our website at www.energean.com.
During the year, the Remuneration Committee received independent and objective advice from Deloitte
LLP principally on market practice and incentive design for which Deloitte LLP was paid £99,083 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 support, tax, direct and indirect tax compliance services, payroll services and
transaction support services in connection with the acquisition of Edison E&P.
Workforce remuneration and engagement
In formulating the pay proposals for 2022, as well as approving pay outcomes for the year, the Committee
have been mindful of the experience of the wider workforce. Energean views its people, the Energean
family, as the foundation upon which our success is built. The Committee is therefore mindful of how
pay in the boardroom compares with pay across the organisation.
The bonus outcome for the Executive Directors cascades down the organisation, ensuring consistency
across the company in incentive outturns. More broadly, the Committee is also kept abreast of workforce
matters through provision of key management information, including gender pay gap data. We have a
dedicated workforce NED in Robert Peck, who acts as the ‘employee voice’ at board level. The Committee
is therefore confident that
in the context of the broader
workforce experience
its pay decisions are appropriate
During 2022, 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 where possible.
Shareholder voting on remuneration resolutions
Votes for
Votes against
Votes withheld
Approval of the Directors’ Remuneration Policy
103,849,415 (75%)
34,092,723 (25%)
0
2021 AGM
Approval of the Annual Report on Remuneration
105,565,663 (77%)
32,376,475 (23%)
0
2021 AGM
At the Annual General Meeting held on 24 May 2021, all resolutions were passed with high levels of
support. However, as a significant minority of shareholders were unsupportive of the resolutions relating
to the Directors' Remuneration Report and Directors’ Remuneration Policy, we subsequently wrote to our
largest shareholders to invite their feedback and also held a number of follow up meetings. We had
discussion meetings and received feedback both from those that supported and those that did not.
Broadly the feedback received primarily related to issues around timing of changes to executive
remuneration and suggestions to the Remuneration Committee about how they would like to see
performance measures and targets strengthened going forward. The revised 2022 bonus scorecard,
along with improved disclosure on 2021 bonus outcomes within this report, will evidence this
strengthening of performance measurement within Energean’s variable pay.
Our inclusion of ESG measures in the LTIP continues to be viewed positively and has been maintained
for 2022. All views received during the consultation were carefully considered by the Committee and
formed part of its decision making relating to remuneration implementation in 2022. We will continue to
proactively engage with shareholders and advisory bodies and welcome any further
input
from shareholders.
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CORPORATE GOVERNANCE
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
23 March 2022
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CORPORATE GOVERNANCE
Group Directors’ Report
The Directors are pleased to present their report on the affairs of the Group, together with the financial
statements for the year ended 31 December 2021. The Corporate Governance Statement set out on
pages 111-117 forms part of this report.
Details of significant events since the balance sheet date are contained in note 30 to the financial
statements on page 251. Details of financial instruments and financial risks are set out in note 27 to the
financial statements on page 239. 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 118-121. The principal risks are detailed on pages
84-103.
Results and dividends
The Group’s financial results for the year ended 31 December 2021 are set out in the consolidated
financial statements.
No dividends have been paid in respect of the year 2021 (2020: nil); and the Directors will not recommend
to shareholders that a dividend be paid at the 2022 AGM.
Capital structure
Details of the issued share capital are shown in note 20 to the financial statements. As at 31 December
2021, the Company’s issued share capital consisted of 177,602,560 ordinary shares of £0.01 each. The
Company has only one class of share, which carries no right to fixed income. Each share carries the right
to one vote at General Meetings of the Company. No person has any special rights of control over the
Company’s share capital and all issued shares are fully paid. There are no specific restrictions on the size
of a holding nor on the transfer of shares, which are both governed by the general provisions of the
Company’s Articles of Association (the “Articles”) and prevailing legislation. The Directors are not aware
of any agreements between holders of the Company’s shares that may result in restrictions on the
transfer of securities or on voting rights. Details of employee share plans are outlined in note 3.15 to the
financial statements on page 199.
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 2021 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 2022. As at 23 March
2022, the Directors had not exercised this authority. The Directors are proposing to renew this authority
at the 2022 AGM.
There are a number of agreements entered into by members of the Group that take effect, alter or
terminate upon a change of control of the Company, such as commercial contracts and bank loans and
other financing agreements. 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 106-110. All of the
Directors will offer themselves for re-election at the AGM in May 2022.
Page 160 of 273
CORPORATE GOVERNANCE
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)
• Kimberley Wood (Independent Non-Executive Director)
• Amy Lashinsky (Independent Non-Executive Director)
• Roy Franklin (Independent Non-Executive Director) – appointed on 13 October 2021
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 (2020: 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:
Shareholder
Number of Shares
Number of
Voting Rights
% of Issued
Share Capital
Growthy Holdings Co. Limited
18,948,260
18,948,260
10.67
Standard Life Aberdeen plc
affiliated investment management
entities
15,951,947
15,951,947 (indirect)
8.98
Oilco Investments Limited
16,016,734
16,016,734
Clal Insurance Company Limited
13,599,003
283,577 (direct)
The Phoenix Holdings Ltd.
Pelham Capital Limited
8,968,710
7,353,314
Annual General Meeting (AGM)
13,315,426(indirect)
8,968,710
7,353,314 (Direct)
9.02
7.66
5.06
4.14
The Company’s AGM will be held in London in May 2022. Formal notice of the AGM will be issued
separately from this Annual Report and Accounts.
Page 161 of 273
CORPORATE GOVERNANCE
Registrars
The Company’s share registrar in respect of its ordinary shares traded on the London Stock Exchange is
Computershare Investor Services PLC, full details of which can be found in the Company Information
section on page 273.
Greenhouse gas (GHG) emissions reporting
Details of the Group’s emissions are contained in the Corporate Social Responsibility report on pages
69-71.
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 23 March 2022
to 30 March 2023 (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
in note 2.1 to the consolidated
financial statements.
is provided
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 concern
period. Therefore, the Directors consider it appropriate to continue to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
Overseas branches and subsidiaries
Details of subsidiaries of the Group are set out in note 31 on pages 252-253 to the Financial Statements.
Hedging
Details of hedging are set out in note 27 on pages 240-242 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.
Page 162 of 273
CORPORATE GOVERNANCE
Requirements of the Listing Rules
The following table provides references to where the information required by Listing Rule 9.8.4R
is disclosed.
Listing Rule requirement
Listing Rule Reference
Section
Capitalisation of interest
Publication of unaudited financial
information
LR 9.8.4R (1)
LR 9.8.4R (2)
Note 10/page 215
Not applicable
Long-term incentive schemes
LR 9.8.4R (4)
Directors’ remuneration report/
pages 133-159 and note 26,
page 239 of the
financial statements
Director emoluments
LR 9.8.4R (5), (6)
No such waivers.
Allotment of equity securities
LR 9.8.4R (7), (8)
No such share allotments
Listed shares of a subsidiary
LR 9.8.4R (9)
Not applicable
Significant contracts with Directors
and controlling shareholders
LR 9.8.4R (10), (11)
Directors’ report/ pages 160-161
Dividend waiver
LR 9.8.4R (12), (13)
Not applicable
Board statement in respect of
relationship agreement with the
controlling shareholder
LR 9.8.4R (14)
Not applicable
This Directors’ Report was approved by the Board and signed on its behalf by the Company Secretary on
23 March 2022.
By order of the Board
Eleftheria Kotsana
Company Secretary
23 March 2022
Company number: 10758801, 44 Baker Street, London W1U 7AL
Page 163 of 273
CORPORATE GOVERNANCE
Statement of Directors’ Responsibilities
The directors are responsible for preparing the annual report and the group and parent company financial
statements in accordance with applicable United Kingdom law and regulations. Company law requires
the directors to prepare financial statements for each financial year.
Under that law the directors are required to prepare the group financial statements in accordance with
UK-adopted International Accounting Standards (UK-adopted IAS) and have elected to prepare the 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 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 UK-adopted IAS
(and 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 UK-adopted IAS 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; and
•
• 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 safeguarding
the assets of the group and company and hence for taking reasonable steps to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a strategic report,
directors’ report, directors’ remuneration report and corporate governance statement that complies with
that law and those regulations. The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Page 164 of 273
CORPORATE GOVERNANCE
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 the Companies Act 2006
and UK adopted International Accounting Standards, give a true and fair view of the assets, liabilities,
financial position and profit of the parent company and undertakings included in the consolidation
taken as a whole;
• That the annual report, including the strategic report, includes a fair review of the development and
performance of the business and the position of the company and undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face; and
• That they consider the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the group’s and
parent company’s position and performance, business model and strategy.
Mathios Rigas
Director
23 March 2022
Panos Benos
Director
23 March 2022
Page 165 of 273
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 2021 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
•
•
We have audited the financial statements of Energean plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 31 December 2021 which comprise:
Group
Parent company
Group statement of financial position as at
31 December 2021
Company statement of financial position as at
31 December 2021
Group income statement for the year then ended Company statement of changes in equity for the
year then ended
Group statement of comprehensive income for
the year then ended
Related notes 1 to 16 to the financial statements
including a summary of significant
accounting policies
Group statement of changes in equity for the
year then ended
Group statement of cash flows for the year then
ended
Related notes 1 to 32 to the financial statements,
including a summary of significant accounting
policies
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and UK adopted international accounting standards. The financial reporting
framework that has been applied in the preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards, including FRS 101 Reduced Disclosure
Framework (‘United Kingdom Generally Accepted Accounting Practice’).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Page 166 of 273
FINANCIAL STATEMENTS
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the
parent company and we remain independent of the group and the parent company in conducting
the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the group and parent company’s ability to continue to adopt the going concern basis of
accounting included the following procedures:
•
In conjunction with our walkthrough of the group’s financial close process, we confirmed our
understanding of management’s going concern assessment process which included the preparation
of a base case cash flow model covering the period 1 January 2022 to 31 March 2023, a reasonable
worst-case scenario and two reverse stress test scenarios.
• We assessed the appropriateness of the duration of the going concern assessment period to the end
of March 2023 and considered whether there are any known events or conditions that will occur
beyond the period.
• We tested the integrity of the models used to calculate the forecast cash flows underlying the going
concern assessment and, where applicable, assessed consistency with information relevant to other
areas of our audit.
• We assessed the reasonableness of the key assumptions included in the base case and reasonable
worst case cash flow models. Our evaluation of the key assumptions within the models included
comparing oil and gas price forecasts to external data, verifying reserves and production estimates
to Competent Person Reports, assessing the progress of the Karish oil and gas development against
plan, and ensuring consistency of forecast operating costs and capital expenditure against approved
budgets. We searched for potentially contradictory evidence that could indicate that management’s
assumptions were inappropriate.
• We verified the starting cash position and the available financing facilities reflected in the models to
the audit work we have performed on those balances, including our understanding of the key terms
associated with the facilities, most notably the fact these facilities do not contain financial covenants
that the group must comply with across the going concern assessment period.
• We evaluated the appropriateness of management’s two reverse stress test scenarios and assessed
the likelihood of such conditions arising during the going concern assessment period to be remote.
• We reviewed the group’s going concern disclosures included in the financial statements in order to
assess whether the disclosures were appropriate and accurately reflected the outcome of the
directors’ assessment process.
Our key observations
• The directors’ assessment forecasts that the group will retain sufficient liquidity throughout the going
concern assessment period in both the base case and an unmitigated reasonable worst-
case scenario.
• As a consequence of the refinancing undertaken during the year, there are no financial covenants the
group must comply with over the going concern assessment period.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the group and parent
company’s ability to continue as a going concern for a period through to 31 March 2023.
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.
Page 167 of 273
FINANCIAL STATEMENTS
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 or company’s ability to continue as a
going concern.
Overview of our audit approach
Audit scope
Key audit
matters
Materiality
• We performed an audit of the complete financial information of five
components and audit procedures on specific balances for a further five
components.
• The components where we performed full or specific audit procedures
accounted for 99% of Total assets, 99% of Revenue, and 99% of group Loss
before tax.
• Recoverability of oil and gas assets, including estimation of oil and gas
reserve volumes
• Revenue recognition and the risk of management override
• Karish and Tanin development project spend
• Overall group materiality of $25.6 million which represents 0.5% of group
assets, adjusted to remove the amount of goodwill related to the group’s
investments in Energean Israel Limited and Edison E&P.
An overview of the scope of the group audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each 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 sixteen (2020:
twenty) reporting components of the group, we selected ten (2020: twelve) components covering entities
within Israel, Italy, Greece, Egypt, Cyprus, and the United Kingdom, which represent the principal business
units within the group.
Of the ten components selected, we performed an audit of the complete financial information of five
components (’full scope components’) which were selected based on their size or risk characteristics.
For the remaining five components (’specific scope components’), we performed audit procedures on
specific accounts within that component that we considered had the potential for the greatest impact on
the significant accounts in the consolidated financial statements either because of the size of these
accounts or their risk profile.
Page 168 of 273
FINANCIAL STATEMENTS
The table below illustrates the coverage obtained from the work performed by our audit teams:
Reporting components
Number
% of Group
total assets
% of Group
Revenue
% of Group Loss
before tax
Full scope
Specific scope115
Full and specific scope coverage
Remaining components116
Total reporting components
5
5
10
6
16
92%
7%
99%
1%
93%
6%
99%
1%
51%
48%
99%
1%
100%
100%
100%
Changes from the prior year
Two components which were previously designated as specific scope have been reclassified as review
scope for 2021 (presented within the remaining components caption above). Furthermore, the number
of review scope components has fallen to six as a result of changes to the group’s internal reporting
structure. These changes were as a result of the changes to the group’s composition following the
integration of the Edison E&P acquisition and our current year assessment of the risks of material
misstatement in the group’s significant accounts.
Involvement with component teams
In establishing our overall approach to the group audit, we determined the type of work that needed to
be undertaken at each of the components by us, as the primary audit engagement team, or by component
auditors from other EY global network firms operating under our instruction. Of the five full scope
components, audit procedures were performed on one of these directly by the primary audit team. For
the five specific scope components, where the work was performed by component auditors, we
determined the appropriate level of involvement to enable us to conclude that sufficient audit evidence
had been obtained as a basis for our opinion on the group as a whole.
The group audit team continued to follow a programme of planned visits that has been designed to
ensure that the Senior Statutory Auditor visits the principal business locations of the group on a rotating
basis. During the current year’s audit cycle, a visit was undertaken by the primary audit team to the
component team in Italy. This visit involved discussing the audit approach with the component team and
any issues arising from their work and meeting with local management. Ongoing travel restrictions
arising from the Covid-19 pandemic prevented further physical site visits in 2021, but we continued with
our programme of virtual site visits and component team oversight in the current year. The primary team
interacted regularly with the component teams where appropriate during various stages of the audit,
reviewed relevant working papers and were responsible for the scope and direction of the audit process.
This, together with the additional procedures performed at group level, gave us appropriate evidence for
our opinion on the group financial statements.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact Energean
plc. The group has determined that the most significant potential future impacts from climate change
will be limited access to capital, increasing costs, and the potential for earlier asset retirement, amongst
others. These are explained on pages 20-29 and 31-33 in the required Task Force for Climate related
Financial Disclosures and on pages 79-103 in the principal risks and uncertainties, which form part of the
’Other information’, rather than the audited financial statements. Our procedures on these disclosures
115 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.
116 Of the remaining six (2020: seven) components, none are individually greater than 1% of the Group’s Total assets. We performed
other procedures, including the following, to respond to any potential risks of material misstatement to the consolidated
financial statements:
•
•
• Made enquiries of management about unusual transactions in these components; and
•
Analytical review procedures on an individual component basis,
Tested consolidation journals, intercompany eliminations and foreign currency translation calculations,
Reviewed minutes of Board meetings held throughout the period.
Page 169 of 273
therefore consisted solely of considering whether they are materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise appear to be materially
misstated.
FINANCIAL STATEMENTS
As explained in Note 4.2 Estimation uncertainty governmental and societal responses to climate change
risks are still developing, and are interdependent upon each other, and consequently financial statements
cannot capture all possible future outcomes as these are not yet known. The degree of certainty of these
changes may also mean that they cannot be taken into account when determining asset and liability
valuations and the timing of future cash flows under the requirements of UK adopted international
accounting standards. In Note 4.2 to the financial statements a description has been provided on how
climate change risks have been considered
in the
financial statements.
judgements and estimates
in the key
Our audit effort in considering climate change was focused on ensuring that the effects of material
climate risks disclosed on pages 31-32 and the group’s commitment to be Net-zero (Scope 1 and 2) by
2050 have been appropriately reflected in the estimation of oil & gas reserves and the impairment
assessments for oil and gas assets. We also challenged the Directors’ considerations of climate change
in their assessment of going concern and viability and associated disclosures.
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
Our response to
the risk
Tangible oil and gas assets: $3,457 million (2020: $3,054 million)
Refer to the Audit and Risk Committee Report (pages 122-126); Accounting
policies (pages 185-206); 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.
This risk affects the production and development assets in Israel, Italy, Egypt,
Greece and the UK.
Where indicators of impairment exist, management determines the recoverable
amount of the asset or cash generating unit (‘CGU’) by preparing discounted cash
flow models.
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.
We assessed management’s approach to identifying indicators of impairment or
reversal of a previously recognised impairment through the year. We considered
external and internal factors that may represent such indicators of impairment or
result in a reversal of a previously recognised impairment.
We concurred with management that there were no indicators of impairment
identified for any of the group’s production and development assets at year-end,
given improvements to both external and internal factors, in particular the price
environment and internal reserves reporting, respectively.
In the case of the Greece CGU, we concurred with management that indicators of
a potential reversal of previously recognised impairment existed.
Page 170 of 273
FINANCIAL STATEMENTS
For this CGU we tested the methodology applied by management to determine
the recoverable amount in accordance with 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 of this CGU by
considering evidence available to support assumptions and the reliability of past
forecasts. Our audit work on the recoverable amount assessment 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 for the former);
• 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 used for the
reserves and resources estimates;
• We performed testing to determine the sensitivity of the impairment model to
changes in key assumptions; and
• We 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 our Greek
component team and overseen by the primary team.
We reported to the Audit and Risk Committee that:
• We consider management’s key assumptions used in the recoverable amount
assessment for the Greece CGU to be reasonable.
• Based on our audit procedures, including relevant sensitivities performed, we
concur with the conclusions reached by management that no impairment
reversal was required.
• Management’s disclosures in the financial statements accurately reflect the
key judgements and estimates made in performing the assessment.
Key
observations
communicated
to the Audit and
Risk Committee
Revenue recognition and the risk of management override
Key audit matter
description
Total revenue: $497 million (2020: $28 million)
Refer to the Audit and Risk Committee Report (pages 122-126); Accounting
policies (pages 185-206); and Note 7 of the Consolidated Financial Statements
Revenue is recognised when the group satisfies a performance obligation by
transferring oil or gas to its customer, which is generally when the customer takes
physical possession of the oil or gas.
There is a risk that revenue could be materially misstated as a result of delayed or
accelerated invoicing and/or posting of inappropriate journal entries.
The acquisition of Edison E&P at the end of 2020 added material producing
assets to the group’s portfolio, mainly in Italy (Vega, Rospo Mare, Clara North
West, Sarago Mare fields) and Egypt (Abu Qir field).
A lower level of revenue continues to be generated from the Greek producing
assets Prinos, Prinos North, South Kavala and Epsilon, and from the UK North Sea
producing assets.
Page 171 of 273
Our response to
the risk
Our procedures to test the appropriateness of revenue recognised during the year
included:
FINANCIAL STATEMENTS
• Confirming our understanding of the revenue accounting process, identifying
the related risks and the controls put in place to address those risks, and
assessing the design effectiveness of these controls;
• Utilising our data-driven audit tools to perform 3-way correlation analysis
•
between revenue, accounts receivable and cash accounts for revenue streams
in each country, and investigating trends or data points outside our
expectations based on our understanding of the revenue streams;
Inspecting a sample of invoices and related delivery notes for revenue
recorded in the period to verify the revenues have been recorded in the correct
period (with reference to the sale terms) as well as the occurrence of the
transaction;
• Sending trade receivable confirmations to third parties and testing subsequent
cash receipts;
• Taking a risk-based approach to identifying, analysing and testing any manual
entries posted to revenue accounts;
• Detailed analytical procedures over revenue and cost of sales, including the
cost per barrel;
• Reconciling the volume of sales with inventory registers, where applicable; and
• Confirming that the prices used to calculate revenue are consistent with the
relevant contractual terms.
We reported to the Audit and Risk Committee that:
• On the basis of the procedures performed we are satisfied with the accuracy of
revenue recognised by Energean for the year ended 31 December 2021 and did
not note any issues with respect to fraud or management override.
Key
observations
communicated
to the Audit and
Risk Committee
Karish and Tanin development project spend
Key audit matter
description
Karish and Tanin development costs incurred during the year ended 31 December
2021 and capitalised within Oil and Gas properties (including capitalised
borrowing costs): $432 million (2020: $497 million)
Refer to Accounting policies (pages 185-206); and Notes 3.5, 3.23 and 13 of the
Consolidated Financial Statements
The Karish and Tanin development attained Final Investment Decision 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.
We focused on the risks of inappropriate capitalisation of costs in accordance
with IAS 16: Property, Plant and Equipment and the completeness of project cost
accruals recorded as at 31 December 2021.
Page 172 of 273
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 development.
FINANCIAL STATEMENTS
These procedures included:
• Understanding the criteria used by management to assess whether costs
should be capitalised or expensed and testing this against the requirements of
IAS 16 and industry practice;
• 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 and confirming
spend during the year with the primary sub-contractor, Technip FMC, which
accounted for approximately 36% 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 2021, validating a
sample of costs to supporting documents and comparing to the contractual
milestones for the development project work; and
• 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 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.
Key
observations
communicated
to the Audit and
Risk Committee
We reported to the Audit and Risk Committee that:
• The capitalisation of development costs for the Karish and Tanin project
spend met the IAS 16 capitalisation criteria; and
• The accruals recorded at year end are complete and appropriately reflect the
cost of services provided by the project contractors during 2021.
In the prior year, our auditor’s report included a key audit matter in relation to accounting for the
acquisition of the Edison E&P business, which is no longer relevant in the current year.
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 $25.6 million (2020: $20.0 million), which is 0.5% (2020:
0.5%) of group assets, adjusted to remove the amount of goodwill related to the group’s investments in
Energean Israel Limited and Edison E&P. This goodwill was driven by the recognition of a deferred tax
liability as part of the business combination accounting which we did not consider to be reflective of the
underlying business activities. We believe that adjusted total assets provides us with a suitable basis for
setting materiality for development stage oil and gas exploration and production companies, providing a
reliable measure to assess the size of the group’s operations.
We determined materiality for the parent company to be $8.2 million (2020: $5.6 million), which is 0.5%
(2020: 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.
Page 173 of 273
FINANCIAL STATEMENTS
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% (2020: 50%) of our planning
materiality, namely $12.9 million (2020: $10.0 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 $2.6 million to $7.8 million
(2020: $2.0 million to $3.5 million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in
excess of $1.3 million (2020: $1.0 million), which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 6-165
and 267-273, including the Strategic Report and the Directors’ Report, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within
the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the course of the
audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of the other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• The information given in the strategic report and the directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
• The strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Page 174 of 273
FINANCIAL STATEMENTS
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report
or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• Adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
• The parent company financial statements and the part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting records and returns; or
• Certain disclosures of directors’ remuneration specified by law are not made; or
• We have not received all the information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the group and company’s compliance with the
provisions of the UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial statements
or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set out on page 162;
• 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 104-105;
• Director’s statement on whether it has a reasonable expectation that the group will be able to continue
in operation and meets its liabilities set out on pages 104-105;
• Directors’ statement on fair, balanced and understandable set out on page 115;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks
set out on pages 83-84;
• The section of the annual report that describes the review of effectiveness of risk management and
internal control systems set out on pages 79-82; and;
• The section describing the work of the audit committee set out on pages 122–126.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on pages 164-165, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
Page 175 of 273
FINANCIAL STATEMENTS
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group
and determined that the most significant are those that relate to the reporting framework (UK adopted
international accounting standards, Companies Act 2006, the UK Corporate Governance Code and
Listing Rules of the UK Listing Authority) and the relevant tax compliance regulations in the
jurisdictions in which the group operates. In addition, we concluded that there are certain 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 the group is complying with
those frameworks by making enquiries of management and with those responsible for legal and
compliance procedures. Other procedures performed to address the risk of management override
included evaluating the business rationale for significant unusual and one-off transactions, reviewing
the minutes of the Board of Directors and Audit 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 also engaged our forensics specialists in assisting our assessment of the
susceptibility of the Group’s financial statements to fraud.
• We determined there to be a risk of fraud associated with management override of the revenue
process, specifically from inappropriate invoicing or journal entries. We have reported our findings in
our key audit matters section of our report. Our procedures incorporated data analytics and manual
journal entry testing into our audit approach.
• Based on this understanding we designed our audit procedures to identify non-compliance with laws
and regulations that could give rise to a material misstatement in the financial statements; this
included the provision of specific instructions to component teams. Our procedures focused on
enquires of group management and a review of Board minutes, Audit and Risk Committee papers,
Internal Audit reports and correspondence received from regulatory bodies.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit and Risk Committee, we were appointed by the
company on 3 September 2020 to audit the financial statements for the year ending 31 December
2021 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is five
years, covering the years ending 31 December 2017 to 31 December 2021 inclusive.
• The audit opinion is consistent with the additional report to the Audit and Risk Committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Page 176 of 273
FINANCIAL STATEMENTS
Andrew Smyth (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
24 March 2022
Page 177 of 273
FINANCIAL STATEMENTS
Group Income Statement
Year ended 31 December 2021
($'000)
Revenue
Cost of sales
Gross profit/(loss)
Notes
2021
2020
7
8a
496,985
28,014
(345,112)
(48,416)
151,873
(20,402)
Administrative and selling expenses
8b/c
(42,973)
(15,283)
Exploration and evaluation expenses
Impairment of property, plant and equipment
Other expenses
Other income
Operating profit/ (loss)
Finance income
Finance costs
Unrealised loss on derivatives
Net foreign exchange gain/(losses)
Loss before tax
8d
13
8e
8f
10
10
27
10
(87,678)
(4,424)
-
(7,019)
17,884
32,087
2,950
(97,380)
(21,477)
(6,922)
(65,299)
(28,329)
9,186
(124,551)
493
(4,986)
-
15,445
(90,742)
(113,599)
Taxation income / (expense)
11
(5,412)
20,741
Loss for the year
(96,154)
(92,858)
Attributable to:
Owners of the parent
Non-controlling interests
(96,046)
(91,414)
(108)
(1,444)
(96,154)
(92,858)
Basic and diluted loss per share (cents per share)
Basic
Diluted
12
12
($0.54)
($0.54)
($0.52)
($0.52)
Page 178 of 273
FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
Year ended 31 December 2021
($’000)
Loss for the year
Other comprehensive profit/(loss):
Items that may be reclassified subsequently to profit or loss
Cash Flow hedges
Gain/(loss) arising in the period
Income tax relating to items that may be reclassified to
profit or loss
2021
2020
(96,154)
(92,858)
(6,182)
1,546
(7,483)
1,721
Exchange difference on the translation of foreign operations, net
of tax
(12,781)
19,222
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
(17,417)
13,460
(165)
40
(125)
(49)
12
(37)
Other comprehensive profit/(loss) after tax
(17,542)
13,423
Total comprehensive loss for the year
(113,696)
(79,435)
Total comprehensive loss attributable to:
Owners of the parent
Non-controlling interests
(113,590)
(76,262)
(106)
(3,173)
(113,696)
(79,435)
Page 179 of 273
Group Statement of Financial Position
FINANCIAL STATEMENTS
Year ended 31 December 2021
($’000)
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Equity-accounted investments
Other receivables
Deferred tax asset
Restricted cash
Current assets
Inventories
Trade and other receivables
Restricted cash
Cash and cash equivalents
Total assets
Equity and Liabilities
Equity attributable to owners of the parent
Share capital
Share premium
Merger reserve
Other reserves
Foreign currency translation reserve
Share-based payment reserve
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Deferred tax liabilities
Retirement benefit liability
Provisions
Other payables
Current liabilities
Trade and other payables
Current portion of borrowings
Derivative financial instruments
Provisions
Total liabilities
Total equity and liabilities
Notes
2021
2020
13
14
19
15
17
18
19
17
16
20
20
20
21
22
15
23
24
25
25
22
27
24
3,499,473
228,141
4
52,639
154,798
100,000
4,035,055
87,203
288,526
99,729
730,839
1,206,297
5,241,352
2,374
915,388
139,903
7,488
(12,823)
19,352
(354,559)
717,123
-
717,123
2,947,126
67,425
2,767
801,026
225,987
4,044,331
454,986
-
12,546
12,366
479,898
4,524,229
5,241,352
3,107,272
275,816
4
31,568
126,056
-
3,540,716
73,019
318,339
-
202,939
594,297
4,135,013
2,367
915,388
139,903
1,792
(42)
13,419
(144,734)
928,093
266,299
1,194,392
330,092
68,609
7,839
881,535
177,193
1,465,268
355,454
1,112,984
6,915
-
1,475,353
2,940,621
4,135,013
Approved by the Board on the 23 March 2022
Matthaios Rigas
Chief Executive Officer
Panos Benos
Chief Financial Officer
Page 180 of 273
Group Statement of Changes in Equity
Year ended 31 December 2021
FINANCIAL STATEMENTS
Equity
component
of
convertible
bonds119
Other
reserve118
Share
based
payment
reserve120
Share
capital
Share
premium117
Translation
reserve121
Retained
earnings
Merger
reserves Total
Non-
controlling
interests Total
($'000)
At 1 January 2020
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 26)
2,367 915,388
5,862
-
-
-
-
-
-
-
-
-
-
-
-
-
(37)
(4,033)
-
(4,070)
-
-
-
-
-
-
-
-
-
-
10,094
(19,264)
(53,320) 139,903 1,001,030 259,722
1,260,752
(91,414)
-
(91,414)
(1,444)
(92,858)
-
-
-
-
-
3,325
-
-
19,222
-
-
19,222
(91,414)
-
-
-
-
(37)
(37)
(4,033)
(1,729)
(5,762)
19,222
-
19,222
(76,262)
(3,173)
(79,435)
-
9,750
9,750
3,325
-
3,325
-
-
-
-
-
117 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.
118 Other reserves are used to recognise remeasurement gain or loss on cash flow hedges and actuarial gain or loss from the defined benefit pension plan.
119 Refer to note 21.
120 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.
121 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.
Page 181 of 273
FINANCIAL STATEMENTS
Equity
component
of
convertible
bonds119
Other
reserve118
Share
based
payment
reserve120
Share
capital
Share
premium117
Translation
reserve121
Retained
earnings
Merger
reserves Total
Non-
controlling
interests Total
2,367 915,388
1,792
-
13,419
(42)
(144,734) 139,903 928,093 266,299
1,194,392
(125)
(4,638)
(96,046)
(96,046)
(108)
(96,154)
(125)
(125)
(4,638)
2
(12,781)
(4,636)
(12,781)
(12,781)
($'000)
At 1 January 2021
Loss for the period
Remeasurement of defined benefit
pension plan
Hedges, net of tax
Exchange difference on the
translation of foreign operations
Total comprehensive income
-
-
(4,763)
-
-
(12,781)
(96,046)
-
(113,590) (106)
(113,696)
Transactions with owners of
the company
Share based payment charges
(note 26)
Exercise of Employee
Share Options
Acquisition of non-
controlling Interests122
7
-
5,940
(7)
5940
-
5,940
-
-
-
10,459
-
-
(113,779)
-
(103,320) (266,193)
(369,513)
At 31 December 2021
2,374 915,388
(2,971)
10,459
19,352
(12,823)
(354,559) 139,903 717,123
-
717,123
122 Represents the acquisition of the remaining 30% minority interest in Energean Israel Limited from Kerogen Investments No.38 Limited, for more details please refer to note 21.
Page 182 of 273
FINANCIAL STATEMENTS
Group Statement of Cash Flows
Year ended 31 December 2021
($’000)
Operating activities
Loss before taxation
Note
2021
2020
(Restated)
(90,742)
(113,599)
Adjustments to reconcile loss before taxation to net cash
provided by operating activities:
Depreciation, depletion and amortisation
13, 14
97,451
13
13
14
23
24
24
10
10
8(f)
26
10
Impairment loss on property, plant and equipment
Loss from the sale of property, plant and equipment
Impairment loss on intangible assets
Defined benefit (gain)/ expense
Movement in provisions
Payments for buyers’ compensation123
Change in decommissioning provision estimates
Finance income
Finance costs
Unrealised loss on derivatives
Non-cash revenues from Egypt124
Other liabilities derecognised
Share-based payment charge
Net foreign exchange loss/ (gain)
Cash flow (used in)/from operations before working capital
adjustments
(Increase)/Decrease in inventories
Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables
Cash flow from operations
Income tax received/(paid)
Net cash inflow from operating activities
24,125
65,299
7,568
2,936
104
(204)
-
36
82,125
(4,062)
(4,465)
(22,958)
(10,198)
-
(2,950)
97,380
21,477
(39,100)
-
5,732
6,922
(493)
4,986
-
-
(4,094)
3,325
(15,445)
136,648
(25,492)
(16,484)
1,944
46,351
24,936
(34,726)
136
131,789
1,524
715
(55)
132,504
1,469
123 During August 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Group has agreed to pay
compensation to these counterparties due to the fact the gas supply date is taking place beyond a certain date as defined. in
the GSPAs (being 30 June 2021). The compensation is accounted as variable purchase consideration under IFRS 15 hence
recognised once production commences and gas is delivered to the offtakers.
124 Non-cash revenues from Egypt arise due to taxes being deducted at source from invoices as such revenue and tax charges
are grossed up to reflect this deduction but no cash inflow or outflow results.
Page 183 of 273
($’000)
Investing activities
FINANCIAL STATEMENTS
Note
2021
2020
(Restated)
Payment for purchase of property, plant and equipment
Payment for exploration and evaluation, and other
intangible assets
13
14
(403,503)
(403,968)
(48,674)
(15,041)
Acquisition of a subsidiary, net of cash acquired
21/6
841
(203,204)
Movement in restricted cash
(199,729)
-
Proceeds from disposal of property, plant and equipment
-
Amounts received from INGL related to the future transfer
of property, plant & equipment125
25
5,673
1,879
22,229
Interest received
Net cash used in investing activities
Financing activities
Drawdown of borrowings
Repayment of borrowings
Senior secured notes Issuance
Proceeds from capital increases by non-
controlling interests
Acquisition of-non-controlling interests
Transaction costs related to acquisition of non-controlling
interest
Repayment of obligations under leases
Debt arrangement fees paid
Finance cost paid for deferred license payments
Finance costs paid
Net cash inflow from financing activities
22
22
22
21
21
2,609
542
(642,783)
(597,563)
175,000
557,000
(1,807,140)
(38,040)
3,068,000
-
-
9,750
(175,000)
(1,677)
-
-
(10,852)
(6,645)
(48,377)
(11,563)
(3,494)
(3,993)
(136,695)
(70,463)
1,059,765
436,046
Net (decrease) / increase in cash and cash equivalents
549,486
(160,048)
Cash and cash equivalents at beginning of the period
202,939
354,419
Effect of exchange rate fluctuations on cash held
(21,586)
8,568
Cash and cash equivalents at end of the period
16
730,839
202,939
125 Comparative amounts have been restated to reclassify the amounts received from INGL from financing activities to investing
activities. Refer to Note 3.26.
Page 184 of 273
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.
The Group’s core assets and subsidiaries as of 31 December 2021 are presented in note 32.
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 UK-adopted International
Accounting Standards (UK-adopted IAS). 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 2021.
The consolidated financial information is presented in US Dollars and all values are rounded to the
nearest thousand dollars except where otherwise indicated.
The consolidated financial statements have been prepared on a going concern basis. The principal
accounting policies adopted by the Group are set out below.
Going concern
The Group carefully manages the risk of a shortage of funds by closely monitoring its funding position
and its liquidity risk. The Going Concern assessment covers the period up to 31 March 2023 ‘the Forecast
Period’.
Cash forecasts are regularly produced based on, inter alia, the Group’s latest life of field production,
budgeted expenditure forecasts, management’s best estimate of future commodity prices (based on
recent published forward curves) and headroom under its debt facilities. The Base Case cash flow model
used for the going concern assessment conservatively assumes first gas from Karish in October 2022,
Brent at $80/bbl in 2022 and $75/bbl in 2023 and PSV (Italian gas price) at €55/MWh in 2022 and
€40/MWh in 2023.
In addition, on a regular basis, the Group performs sensitivity tests of its liquidity position to evaluate
adverse impacts that may result from changes to the macro-economic environment such as a reduction
in commodity prices. The Group is not exposed to floating interest rate risk. The Group also looks at the
impact of changes or deferral of key projects. This is done to identify risks to liquidity to enable
management to formulate appropriate and timely mitigation strategies in order to manage the risk of
funds shortfalls and to ensure the Group’s ability to continue as a going concern. Such assumptions
underpin management’s reasonable worst-case scenario to further assess the robustness of the Group’s
liquidity position over the Forecast Period.
Reverse stress testing was performed to determine what levels of prices and/or production would need
to occur for the liquidity headroom to be eliminated, prior to any mitigating actions; the likelihood of such
conditions occurring was concluded to be remote. In the event an extreme downside scenario occurred,
prudent mitigating actions could be executed in the necessary timeframe such as a tightening of
operating costs and reductions/postponement of other discretionary exploration and development
expenditures. There is no material impact of climate change within the Forecast Period therefore it does
not form part of the reverse stress testing performed by management.
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FINANCIAL STATEMENTS
As of 31 December 2021 the Group’s available liquidity was approximately $1 billion. In terms of the
Group’s Borrowing Facilities, the following was considered as part of management’s assessment:
1
Energean Israel Project Bond:
In March 2021 Energean raised $2.5billion through the issuance of bonds to (i) refinance its $1.45bn
Israel 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 capital and exploration
expenditure in Israel, including Karish and Karish North, and (iv) for general corporate purposes of
the Group.
2
Energean plc Corporate Bond:
In November 2021 Energean raised a $450 million Bond to (i) repay all amounts outstanding under the
Egypt and Greek RBLs plus subordinated debt, (ii) to pay fees and other expenses related to the Bond,
and (iii) for general corporate purposes of the Group.
There are no financial maintenance covenants associated with either of the Bonds.
3
Greek State-Backed Loan
In December 2021 Energean signed a €100 million loan backed by the Greek State which is to be used
specifically for the development of the Prinos Area in Greece, including the Epsilon development.
In forming its assessment of the Group’s ability to continue as a going concern, including its review of
the forecasted cashflow of the Group over the Forecast Period, the Board has made judgements about:
• Reasonable sensitivities appropriate for the current status of the business and the wider macro
•
environment; and
the Group’s ability to implement the mitigating actions within the Group’s control, in the event this
were required.
After careful consideration, the Directors are satisfied that the Group has sufficient financial resources
to continue in operation for the foreseeable future, for the Forecast Period to 31 March 2023. 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
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
The amendments provide temporary reliefs which address the financial reporting effects when an
interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The
amendments include the following practical expedients:
• A practical expedient to require contractual changes, or changes to cash flows that are directly
required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement
in a market rate of interest
• Permit changes required by IBOR reform to be made to hedge designations and hedge documentation
without the hedging relationship being discontinued
• Provide temporary relief to entities from having to meet the separately identifiable requirement when
an RFR instrument is designated as a hedge of a risk component.
These amendments had no impact on the consolidated financial statements of the Group.
Covid-19-related rent concessions beyond 30 June 2021 (Amendment to IFRS 16) – 1 April 2021
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
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FINANCIAL STATEMENTS
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.
These amendments 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 2021 year end
New standards and interpretations that are in issue but not yet effective are listed below:
• Annual improvements to IFRS 2018-2020 - 1 January 2022
• Property, Plant and Equipment: Proceeds before intended use (Amendments to IAS 16) –
1 January 2022
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) – 1 January 2022
• Reference to the Conceptual Framework (Amendments to IFRS 3) – 1 January 2022
•
• Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative
IFRS 17 Insurance Contracts - 1 Jan 2023
Information - 1 January 2023
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) –
1 January 2023
• Definition of Accounting Estimates (Amendments to IAS 8) - 1 January 2023
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS
12) – 1 January 2023
• Classification of Liabilities as Current or Non-current (Amendments to IAS 1) and Deferral of Effective
Date of Amendment - 1 January 2024
The adoption of the above standard and interpretations is not expected to lead to any material changes
to the Group’s accounting policies or have any other material impact on the financial position or
performance of the Group.
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 31. Control is achieved when the Group
is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee. Specifically, the Group controls an investee if
and only if the Group has:
• 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.
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FINANCIAL STATEMENTS
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 Energean Italy Spa, Energean International E&P
Spa, Energean Oil & Gas S.A., and US$ for Energean Israel Limited, Energean Egypt Limited, Energean
International Limited and Energean Capital Limited.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
retranslation of monetary assets and liabilities denominated in foreign currencies are recognised in the
profit or loss. Such monetary assets and liabilities are translated at year end foreign exchange rates. Non-
monetary items denominated in a foreign currency are translated at the exchange rates prevailing at the
date of the transaction and are not subsequently remeasured.
Translation to presentation currency
For the purpose of presenting consolidated financial statements information, the assets and liabilities of
the Group are expressed in US$. The Company and its subsidiaries’ assets and liabilities are translated
using exchange rates prevailing on the reporting date. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates have fluctuated significantly during that
period, in which case the exchange rates at the dates of the transactions are used. Exchange differences
arising are recognised in other comprehensive income and accumulated in the Group's translation
reserve. Such translation differences are reclassified to profit or loss in the period in which the foreign
operation is disposed of.
3.2 Business combinations and goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value, which is calculated as the
sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for
control of the acquiree. For each business combination the acquirer measures the non-controlling
interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net
assets. Acquisition-related costs are recognised in the consolidated statement of profit or loss
as incurred.
Where appropriate, the cost of acquisition includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair
values are adjusted against the cost of acquisition where they qualify as measurement period
adjustments. All other subsequent changes in the fair value of contingent consideration classified are
accounted for in profit or loss. Contingent consideration classified as equity is not remeasured.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for
recognition under IFRS 3 Business Combinations are recognised at their fair value at the acquisition date,
except that:
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FINANCIAL STATEMENTS
• 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.
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 recognised at cost.
The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net
assets of the associate or joint venture since the acquisition date. Goodwill relating to the Associate or
Joint Venture
investment and is not tested for
impairment separately.
included in the carrying amount of the
is
The statement of profit or loss reflects the Group’s share of the results of operations of the Associate or
Joint Venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition,
when there has been a change recognised directly in the equity of the Associate or Joint Venture, the
Group recognises its share of any changes, when applicable, in the statement of changes in equity.
Unrealised gains and losses resulting from transactions between the Group and the Associate or Joint
Venture are eliminated to the extent of the interest in the associate or joint venture.
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FINANCIAL STATEMENTS
The aggregate of the Group’s share of profit or loss of an Associate and a Joint Venture is shown on the
face of the statement of profit or loss outside operating profit and represents profit or loss after tax and
non-controlling interests in the subsidiaries of the Associate or Joint Venture.
The financial statements of the Associate or Joint Venture are prepared for the same reporting period as
the Group. When necessary, adjustments are made to bring the accounting policies in line with those of
the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an
impairment loss on its investment in its Associate or Joint Venture. At each reporting date, the Group
determines whether there is objective evidence that the investment in the Associate or Joint Venture is
impaired. If there is such evidence, the Group calculates the amount of impairment as the difference
between the recoverable amount of the Associate or Joint Venture and its carrying value, and then
recognises the loss within ‘Share of profit of an Associate and a Joint Venture’ in the statement of profit
or loss.
Upon loss of significant influence over the Associate or joint control over the Joint Venture, the Group
measures and recognises any retained investment at its fair value. Any difference between the carrying
amount of the Associate or Joint Venture upon loss of significant influence or joint control and the fair
value of the retained investment and proceeds from disposal is recognised in profit or loss.
Joint operations
A joint operation is a type of joint arrangement whereby the parties that have joint control of the
arrangement have the right to the assets and obligations for the liabilities, relating to the arrangement. In
relation to its interests in joint operations, the Group recognises its share of:
• Assets, including its share of any assets held jointly.
• Liabilities, including its share of any liabilities incurred jointly.
• Revenue from the sale of its share of the output arising from the joint operation.
• Share of the revenue from the sale of the output by the joint operation.
• Expenses, including its share of any expenses incurred jointly.
The Group is engaged in oil and gas exploration, development and production through unincorporated
joint arrangements particularly in Italy and the UK. These are classified as joint operations in accordance
with IFRS 11. The Group accounts for its share of the results and assets and liabilities of these joint
operations. In addition, where Energean acts as operator to the joint operation, the gross liabilities and
receivables (including amounts due to or from non-operating partners) of the joint operation are included
in the Group’s balance sheet. Where another party acts as operator, the Group’s share of the liabilities of
those non-operated fields is recognised within trade and other payables. A list of the Group’s joint
operations and its working interest in each is disclosed in note 32.
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
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FINANCIAL STATEMENTS
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 completion of
infrastructure facilities such as platforms, pipelines and the drilling of development wells, including
unsuccessful development or delineation wells,
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.
is capitalised within
‘Assets
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% statistical
probability that the actual quantity of recoverable reserves will be more than the amount estimated as
proven and probable reserves and a 50% statistical probability that it will be less.
3.7 Depletion and amortisation
All expenditure carried within each field is amortised from the commencement of production on a unit of
production basis, which is the ratio of oil and gas production in the period to the estimated quantities of
commercial reserves at the end of the period plus the production in the period, generally on a field-by-
field basis or by a group of fields which are reliant on common infrastructure. Costs included in the unit
of production calculation comprise the net book value of capitalised costs plus the estimated future field
development costs required to recover the commercial reserves remaining. Changes in the estimates of
commercial reserves or future field development costs are dealt with prospectively.
3.8
Impairments of oil & gas properties
The group assesses assets or groups of assets, called cash-generating units (CGUs), for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset or CGU may
not be recoverable; for example, changes in the group’s assumptions about commodity prices, low field
utilisation, significant downward revisions of estimated reserves or increases in estimated future
development expenditure or decommissioning costs. If any such indication of impairment exists, the
group makes an estimate of the asset’s or CGU’s recoverable amount.
Where there is 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.
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FINANCIAL STATEMENTS
Fair value less costs of disposal is the price that would be received to sell the asset in an orderly
transaction between market participants and does not reflect the effects of factors that may be specific
to the group and not applicable to entities in general.
In order to discount the future cash flows the Group calculates CGU-specific discount rates. The discount
rates are based on an assessment of a relevant peer group’s Weighted Average Cost of Capital (WACC).
The Group then adds any exploration risk premium which is implicit within a peer group’s WACC and
subsequently applies additional country risk premium for CGUs. Where conditions giving rise to
impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the
income statement, net of any amortisation that would have been charged since the impairment.
The reversal is limited such that the carrying amount of the asset exceeds neither its recoverable amount,
nor the carrying amount that would have been determined, net of depreciation, had no impairment loss
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 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.
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FINANCIAL STATEMENTS
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
impairment been
recognised previously.
that would have been determined had no
the carrying value
Exploration and evaluation assets are tested for impairment when there is an indication that a particular
exploration and evaluation project may be impaired. Examples of indicators of impairment include a
significant price decline over an extended period, the decision to delay or no longer pursue the exploration
and evaluation project, or an expiration of rights to explore an area. In addition, exploration and evaluation
assets are assessed for impairment upon their reclassification to producing assets (oil and gas interest
in property, plant and equipment). In assessing the impairment of exploration and evaluation assets, the
carrying value of the asset would be compared to the estimated recoverable amount and any impairment
loss is recognised immediately in profit or loss.
Goodwill is tested for impairment annually as at 31 December and when circumstances indicate that the
carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of
CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying
amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in
future periods.
3.12 Convertible bonds
Convertible bonds are separated into liability and equity components based on the terms of the contract.
The fair value of the liability component on initial recognition is calculated by discounting the contractual
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FINANCIAL STATEMENTS
cash flows using a market interest rate for an equivalent non-convertible instrument. The difference
between the fair value of the liability component and the proceeds received on issue is recorded as equity.
Transaction costs are apportioned between the liability and the equity components of the instrument
based on the amounts initially recognised. The liability component is classified as a financial liability
measured at amortised cost (net of transaction costs) until it is extinguished on conversion or settlement.
The equity component is not remeasured.
3.13 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, leases of low-value assets and leases to explore for or use minerals, oil, natural gas and similar
non-regenerative resources. The Group recognises lease liabilities to make lease payments and right-of-
use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the
underlying asset is available for use).
The right-of-use asset is measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. Cost comprises the initial amount of the lease
liability and any lease payments made at or before the commencement date, plus any initial direct costs
incurred and an estimate of costs required to remove or restore the underlying asset, less any lease
incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the
lease term and the estimated useful lives of the assets, as follows:
• Property leases 1 to 10 years
• Motor vehicles and other equipment 1 to 12 years
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present
value of lease payments to be made over the lease term. The lease payments include fixed payments
(including in substance fixed payments) less any lease incentives receivable, variable lease payments
that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The
lease payments also include the exercise price of a purchase option reasonably certain to be exercised
by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group
exercising the option to terminate.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the
lease commencement date if the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to
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FINANCIAL STATEMENTS
future payments resulting from a change in an index or rate used to determine such lease payments) or
a change in the assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in Interest-bearing loans and borrowings (see Note 21).
iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption
to leases of office equipment that are considered to be low value. Lease payments on short-term leases
and leases of low value assets are recognised as expense on a straight-line basis over the lease term.
iv) Other leases outside the scope of IFRS 16
Leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources are outside
the scope of IFRS 16 and are recognised as exploration and evaluation costs or as oil and gas assets, as
appropriate. Please refer to notes 3.4 and 3.5.
Accounting for leases in joint operations
Where the Group enters into lease agreements as operator of a joint operation and is sole signatory to a
lease contract, it recognises its obligations under the lease in full to reflect the legal position of the Group
as the contracting counterparty for such leases. Where the obligations of the non-operator parties under
the joint operating agreement give rise to a sub-lease, the related proportion of the right-of-use asset is
derecognised and a finance lease receivable recorded to reflect the proportion of the lease liability
recoverable from the non-operator parties to the joint operating agreement.
3.14 Financial instruments - initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair
value through other comprehensive income (OCI), or fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of
trade receivables that do not contain a significant financing component or for which the Group has
applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that
do not contain a significant financing component or for which the Group has applied the practical
expedient are measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it
needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal
amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets
in order to generate cash flows. The business model determines whether cash flows will result from
collecting contractual cash flows, selling the financial assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in two categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through profit or loss
Financial assets at amortised cost
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FINANCIAL STATEMENTS
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method
and are subject to impairment under the expected credit loss model. Gains and losses are recognised in
profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost include trade receivables.
Financial assets at fair value through profit or loss
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.
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).
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.
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FINANCIAL STATEMENTS
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 financial liabilities recognised at fair value through profit and loss are recognised in
the statement of profit or loss. The Group discloses the unwinding of the discount separately, in finance
costs, from the mark to market gain or loss.
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised, modified and through the EIR
amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit or loss.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in the statement of profit or loss.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statement of financial position if there is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities
simultaneously.
Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Group uses derivative financial instruments, such as interest rate swaps and forward commodity
contracts, to hedge its interest rate risks and commodity price risks, respectively. Such derivative
financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as:
• Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or
liability or an unrecognised firm commitment
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FINANCIAL STATEMENTS
• Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to
a particular risk associated with a recognised asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognised firm commitment
• Hedges of a net investment in a foreign operation
At the inception of a hedge relationship, the Group formally designates and documents the hedging
instrument and the hedged item to which it wishes to apply hedge accounting and the risk management
objective and strategy for undertaking the hedge.
A hedging
effectiveness requirements:
relationship qualifies
for hedge accounting
if
it meets all of
the
following
• There is ‘an economic relationship’ between the hedged item and the hedging instrument.
• The effect of credit risk does not ‘dominate the value changes’ that result from that economic
relationship.
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group
actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow
hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss.
The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging
instrument and the cumulative change in fair value of the hedged item attributable to the hedged risk.
From time to time, the Group may use forward commodity contracts for its exposure to volatility in the
commodity prices. The ineffective portion relating to forward commodity contracts is recognised in
revenue or cost of sales.
The Group designates only the spot element of forward contracts as a hedging instrument. The forward
element is recognised in OCI and accumulated in a separate component of equity.
The amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the
same period or periods during which the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must
remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the
amount will be immediately reclassified to profit or loss as a reclassification adjustment. After
discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must be
accounted for depending on the nature of the underlying transaction.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Ordinary shares
Ordinary shares are classified as equity and measured at their nominal value. Any premiums received on
issue of share capital above its nominal value, are recognised as share premium within equity. Associated
issue costs are deducted from share premium.
3.15 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).
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FINANCIAL STATEMENTS
Awards to employees:
Employees (including senior executives) of the Group receive remuneration in the form of share-based
payments, whereby employees render services as consideration for equity instruments (equity-
settled transactions).
The fair value of the equity settled awards has been determined at the date of grant of the award allowing
for the effect of any market-based performance conditions.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity
(share-based payment reserve), over the period in which the service and, where applicable, the
performance conditions are fulfilled (the vesting period). The cumulative expense recognised for equity-
settled transactions at each reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Group’s best estimate of the number of equity instruments that will ultimately
vest. The expense or credit in the statement of profit or loss for a period represents the movement in
cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant
date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s
best estimate of the number of equity instruments that will ultimately vest. Market performance
conditions are reflected within the grant date fair value. Any other conditions attached to an award, but
without an associated service requirement, are considered to be non-vesting conditions. Non-vesting
conditions are reflected in the fair value of an award and lead to an immediate expensing of an award
unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance
and/or service conditions have not been met. Where awards include a market or non-vesting condition,
the transactions are treated as vested irrespective of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions are satisfied.
3.16 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
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FINANCIAL STATEMENTS
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.
3.17 Cash and cash equivalents
Cash and cash equivalents comprise of cash at bank, demand deposits and also cash reserves retained
as a bank security pledge in respect of bank guarantees (Note 28), with a maturity of three months or
less that are subject to an insignificant risk of changes in their fair value.
The cash reserves retained as a bank security pledge in respect of bank guarantees are defined as
deposits in escrow and held in designated bank deposits accounts to be released when the Group meet
the specified expenditure milestones.
Restricted cash comprises balances retained in respect of the Group’s Senior Secured Notes and cash
collateral provided under a letter of credit facility for issuing bank guarantees for Group's activities in
Israel (see Note 17). The nature of the restrictions on these balances mean that they do not qualify for
classification as cash equivalents.
3.18 Over/underlift
Lifting or offtake arrangements for oil and gas produced in certain of the Group’s jointly owned operations
are such that each participant may not receive and sell its precise share of the overall production in each
period. The resulting imbalance between cumulative entitlement and cumulative production less stock is
underlift or overlift. Underlift and overlift are valued at market value and included within receivables and
payables respectively. Movements during an accounting period are adjusted through cost of sales such
that gross profit is recognised on an entitlements basis.
In respect of redeterminations, any adjustments to the Group’s net entitlement of future production 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.
3.19 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.
3.20 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,
Page 200 of 273
FINANCIAL STATEMENTS
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.
Decommissioning costs
Provision for decommissioning is recognised in full when the related facilities are installed. A
corresponding amount equivalent to the provision is also recognised as part of the cost of the related
property, plant and equipment.
The amount recognised is the estimated cost of decommissioning, discounted to its net present value
at a risk-free discount rate, and is reassessed each year in accordance with local conditions and
requirements. Changes in the estimated timing of decommissioning or decommissioning cost estimates
are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment
to property, plant and equipment. The unwinding of the discount on the decommissioning provision is
included as a finance cost.
3.21 Revenue
Revenue from contracts with customers is recognised when control of the goods or services are
transferred to the customer at an amount that reflects the consideration to which the Group expects to
be entitled in exchange for those goods or services. The Group has concluded that it is the principal in its
revenue arrangements because it typically controls the goods or services before transferring them to the
customer.
Sale of gas, crude oil and by products
Sales revenue represents the sales value, net of VAT, of actual sales volumes to customers in the year
together with the gain/loss on realisation of cash flow hedges.
The Group’s accounting policy under IFRS 15 is that revenue is recognised when the Group satisfies a
performance obligation by transferring oil or gas to its customer. The title to oil and gas typically transfers
to a customer at the same time as the customer takes physical possession of the oil or gas. Typically, at
this point in time, the performance obligations of the Group are fully satisfied. The revenue is recorded
when the oil or gas has been physically delivered to a vessel or pipeline.
Rendering of services
The Group recognises revenue from technical advisory services, using an input method to measure
progress towards complete satisfaction of the service, because the customer simultaneously receives
and consumes the benefits provided by the Group. The Group recognises revenue from advisory services
on the basis of the labour hours expended relative to the total expected labour hours to complete
the service.
3.22 Retirement benefit costs
State managed retirement benefit scheme
Payments made to state managed retirement benefit schemes (e.g. Government Social Insurance Fund)
are dealt with as payments to defined contribution plans where the Group's obligations under the plans
are equivalent to those arising in a defined contribution plan. The Group's contributions are expensed as
incurred and are included in staff costs. The Group has no legal or constructive obligations to pay further
contributions if the government scheme does not hold sufficient assets to pay all employees benefits
relating to employee service in the current and prior periods.
Defined benefit plan
The Group operates an unfunded defined benefit plan in which a lump sum amount is specified and is
payable at the termination of employees’ services based on such factors as the length of the employees’
service and their salary. The liability recognised for the defined benefit plan is the present value of the
defined benefit obligation at the reporting date.
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FINANCIAL STATEMENTS
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.
3.23 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.
3.24 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.
3.25 Equity, reserves and dividend payments
Share capital represents the nominal (par) value of shares that have been issued. Share premium
includes any premiums received on issue of share capital. Any transaction costs associated with the
issuing of shares are deducted from share premium, net of any related income tax benefits.
Other components of equity include the following:
• 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)
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FINANCIAL STATEMENTS
• Merger reserves - On 30 June 2017, the Company became the parent company of the Group through
the acquisition of the full share capital of Energean E&P Holdings Limited. From that point, in the
consolidated financial statements, the share capital became that of Energean plc. The previously
recognised share capital and share premium of Energean E&P Holdings Limited was eliminated with
a corresponding positive merger reserve.
Share-based payment reserve: The share-based payments reserve is used to recognise the value of
equity-settled share-based payments granted to parties including employees and key management
personnel, as part of their remuneration.
Retained earnings includes all current and prior period retained profits.
All transactions with owners of the parent are recorded separately within equity.
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends
have been approved in a general meeting prior to the balance sheet date.
3.26 Restatement of comparatives in Consolidated Cash Flow Statement
Following a review of the Group’s 2020 Annual Report by the Directors subsequent to correspondence
with the Financial Reporting Council (‘FRC’), the Group has changed the classification of the amounts
received from INGL from financing activities to investing activities. These cash inflows represent the
contribution received from INGL in relation to the onshore section of the Karish and Tanin infrastructure
and the near shore section of pipeline extending to approximately 10km offshore. For further information
on the INGL transaction refer to note 25.
The Group previously presented the contributions from INGL as financing activities as this was reflective
of the length of time between their receipt from INGL and when Energean is expected to complete the
construction of this infrastructure. Following the review performed, the Group has reconsidered the
treatment and considers that the cash inflows from INGL should be classified as investing activities in
accordance with IAS 7 as they do not meet the definition of a financing activity, which is ‘activities that
result in changes in the size and contribution of the contributed equity and borrowings of the entity’.
Comparative figures for the 2020 financial year have been restated as follows.
($’000)
As
previously stated
Reclassification of
prepayments
from INGL
Amounts received from INGL related to the
future transfer of property, plant
& equipment
-
Net Cash used in Investing activities
(619,792)
Advance payment from future sale of
property, plant and equipment (INGL)
22,229
22,229
22,229
(22,229)
Restated
22,229
(597,563)
-
Net cash inflow from financing Activities
458,275
(22,229)
436,046
The FRC has confirmed that the matter is now closed. The FRC’s question was originally contained in a
letter issued in respect of our 2020 Annual Report & Accounts. The FRC’s role is to consider compliance
with reporting standards and is not to verify the information provided to them. Therefore, given the scope
and inherent limitations of their review, which does not benefit from any detailed knowledge of the Group,
it would not be appropriate to infer any assurance from their review that our 2020 Annual Report and
Accounts was correct in all material respects.
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FINANCIAL STATEMENTS
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.
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.
Capitalised costs will be written off to the income statement as exploration costs unless commercial
reserves are established or the determination process is not completed and there are no indications of
impairment in accordance with the Group’s accounting policy. The process of determining whether there
is an indicator for impairment or impairment reversal and quantifying the amount requires critical
judgement. The key areas in which management has applied judgement as follows: the Group’s intention
to proceed with a future work programme; the likelihood of license renewal or extension; the assessment
of whether sufficient data exists to indicate that, although a development in the specific area is likely to
proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full
from successful development or by sale; and the success of a well result or geological or
geophysical survey.
Identification of cash generating units
In considering the carrying value of property, plant and equipment the Group has to make a critical
judgement in relation to the identification of the smallest cash generating units to which those assets
are allocated. In all countries except for Italy the cash generating unit is considered to be at the
concession level. In Italy the gas field concessions are connected via a shared pipeline with different
points of entry, which allows production to be changed from one concession to another. In view of this
Page 204 of 273
FINANCIAL STATEMENTS
shared infrastructure that exists in Italy and the ability to move sales between assets as well as the
management of spare parts and the organisational structure of the Italian business the Group has
determined that the related cash inflows are interdependent and therefore identified cash generating
units in Italy to be at the country and commodity level (being Italy gas and Italy oil) which is consistent
with how the Group monitors the business.
4.2 Estimation uncertainty
The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year, are discussed below:
Impairment of property, plant and equipment
The Group assesses at each reporting date whether there is an indication that an asset (or CGU) may be
impaired. The Group assesses impairment at each reporting date by evaluating conditions specific to the
Group that may lead to impairment of assets. Where indicators of impairments or impairment reversals
are present and an impairment or impairment reversal test is required, the calculation of the recoverable
amount requires estimation of future cash flows within complex impairment models. The recoverable
amount (which is the higher of fair value less costs to sell and value in use) of the cash-generating unit
to which the assets belong is then estimated based on the present value of future discounted cash flows.
Key assumptions and estimates used in both the impairment models and in the calculation of the fair
value of property, plant and equipment acquired as part of business combination relate to: commodity
prices assumptions, production profile, the future impact risks associated with climate change and other
factors, 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.
Management has considered how the Group’s identified climate risks and climate related goals (as
discussed in the Strategic Report) may impact the estimation of the recoverable value of cash-generating
units in the impairment assessments. The anticipated extent and nature of the future impact of climate
on the Group’s operations and future investment, and therefore estimation of recoverable value, is not
uniform across all cash-generating units. In particular, this is impacted by the activity of the cash-
generating unit, current technologies and production processes employed and the current level of
emissions and energy efficiency.
The Group is in the process of identifying a range of actions and initiatives to progress towards the
Group’s commitment to become a net-zero emitter by 2050. In certain cases the costs of such actions
have been quantified and are included in the Group’s forecasts which are used to estimate recoverable
value for the Group’s cash-generating units, most significantly carbon costs in Prinos.
There is a range of inherent uncertainties in the extent that responses to climate change may impact the
recoverable value of the Group’s cash-generating units, with many of these being outside the Group’s
control. These include the impact of future changes in government policies, legislation and regulation,
societal responses to climate change, the future availability of new technologies and changes in supply
and demand dynamics.
Further details about the carrying value of property, plant and equipment are shown in Note 13 of the
consolidated financial statements.
Measurement of Contingent consideration (note 27.2)
The acquisition of Edison Exploration & Production S.p.A completed in 2020 included a contingent
consideration of up to $100.0 million for which the fair value has been estimated at $78.5 million at
Page 205 of 273
FINANCIAL STATEMENTS
31 December 2021, 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 and gas in place, recovery factors and future
prices. The level of estimated commercial reserves is also a key determinant in assessing whether the
carrying value of any of the Group’s oil and gas properties has been impaired. As the economic
assumptions used may change and as additional geological information is produced during the operation
of a field, estimates of recoverable reserves may change. Such changes may impact the Group’s reported
financial position and results which include:
• Depreciation and amortisation charges in profit or loss may change where such charges are
determined using the units of production method, or where the useful life of the related assets change
Impairment charges in profit or loss
•
• Provisions for decommissioning may change where changes to the reserve estimates affect
expectations about when such activities will occur and the associated cost of these activities
• The recognition and carrying value of deferred tax assets may change due to changes in the
judgements regarding the existence of such assets and in estimates of the likely recovery of such
assets.
The impact upon commercial reserves (if any) and the aggregate depletion charge for the year of a
fluctuation of the forward Brent oil price assumption as well as the Group’s carrying amount of oil and
gas properties for the current and prior period are presented in note 13. Management monitors the
impact on the commercial reserves and the depletion charge on a Group level.
Decommissioning liabilities (note 23):
There is uncertainty around the cost of decommissioning as cost estimates can vary in response to many
factors, including from changes to market rates for goods and services, to the relevant legal
requirements, the emergence of new technology or experience at other assets. The expected timing, work
scope, amount of expenditure, discount and inflation rates may also change. Therefore significant
estimates and assumptions are made in determining the provision for decommissioning.
The estimated decommissioning costs are reviewed annually by an internal expert and the results of this
review are then assessed alongside estimates from operators. Provision for environmental clean-up and
remediation costs is based on current legal and contractual requirements, technology and price levels.
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. Before the acquisition of Edison E&P on 17 December 2020, 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).
Page 206 of 273
FINANCIAL STATEMENTS
Segment revenues, results and reconciliation to profit before tax
The following is an analysis of the Group’s revenue, results and reconciliation to profit/(loss) before tax
by reportable segment:
($'000)
Europe
Israel
Egypt
Year ended 31 December 2021
Other & inter-
segment
transactions
Total
Revenue from Oil
Revenue from Gas
Other
Total revenue
165,496
137,468
13,156
316,120
-
-
-
-
-
144
133,503
(2)
55,446
(8,226)
188,949
(8,084)
Adjusted EBITDAX126
88,288
(4,969)
130,634
(1,881)
165,640
270,969
60,376
496,985
212,072
Reconciliation to profit before tax:
Depreciation and
amortisation expenses
(55,001)
(93)
(41,626)
(731)
(97,451)
Share-based payment charge
(967)
(231)
Exploration and evaluation expenses
(86,490)
(50)
-
-
(4,523)
(1,138)
Other expense
Other income
Finance income
Finance costs
(2,150)
(461)
(1,543)
(2,865)
16,065
19
1,851
(51)
13,450
7,849
985
(19,334)
2,950
(28,318)
(18,526)
(9,059)
(41,477)
Unrealised loss on derivatives
(21,477)
-
Net foreign exchange gain/(loss)
31,000
520
-
479
-
(38,921)
(6,922)
Profit/(loss) before income tax
(45,600)
(15,942) 81,721
(110,921)
(90,742)
Taxation income / (expense)
29,026
5,017
(39,100)
(355)
(5,412)
(16,574)
(10,925) 42,621
(111,276)
(96,154)
(5,721)
(87,678)
(7,019)
17,884
(97,380)
(21,477)
Profit/(loss) from
continuing operations
Year ended 31 December 2020
Revenue from oil
Revenue from Gas
Petroleum products sales
Rendering of services
Total revenue
17,987
2,250
326
6,800
27,363
-
-
-
-
-
1,580
5,097
-
92
6,769
-
-
-
(6,118)
(6,118)
(4,030)
19,567
7,347
326
774
28,014
(8,335)
Adjusted EBITDAX126
(4,874)
(3,574)
4,143
Reconciliation to profit before tax:
Depreciation and
amortisation expenses
(21,399)
(294)
(1,989)
(443)
(24,125)
126 Adjusted EBITDAX is a non-IFRS measure used by the Group to measure business performance. It is calculated as profit or
loss for the period, adjusted for discontinued operations, taxation, depreciation and amortisation, share-based payment charge,
impairment of property, plant and equipment, other income and expenses (including the impact of derivative financial
instruments and foreign exchange), net finance costs and exploration and evaluation expenses.
Page 207 of 273
FINANCIAL STATEMENTS
Other & inter-
segment
transactions
(2,712)
(980)
-
Total
(3,225)
(4,424)
(65,299)
(24,492)
(28,329)
4,343
4
(1,216)
9,186
493
(4,986)
15,445
($'000)
Europe
Israel
Egypt
Share-based payment charge
(471)
(42)
Exploration and evaluation expenses
(2,942)
(502)
Impairment loss on property, plant
and equipment
(65,299)
-
Other expense
Other income
Finance income
Finance costs
(1,137)
(2,700)
4,154
-
224
201
(3,619)
(326)
-
-
-
-
689
64
175
Net foreign exchange gain/(loss)
10,769
1,862
(967)
3,781
Profit before income tax
(84,594)
(5,375)
2,115
(25,745)
(113,599)
Taxation income / (expense)
21,009
495
(1,081)
318
20,741
Profit from continuing operations
(63,585)
(4,880)
1,034
(25,427)
(92,858)
The following table presents assets and liabilities information for the Group’s operating segments as at
31 December 2021 and 31 December 2020, respectively:
Year ended 31 December 2021
($'000)
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
Oil & Gas properties
537,600
2,584,828 342,528
(9,694)
3,455,262
Other fixed assets
Intangible assets
16,578
3,917
24,076
(360)
74,868
95,941
20,484
36,848
Trade and other receivables
164,131
22,769
102,605
(979)
Deferred tax asset
154,798
-
-
-
44,211
228,141
288,526
154,798
Other assets
Total assets
674,157
379,248
98,720
(81,711)
1,070,414
1,622,132 3,086,703 588,413
(55,896)
5,241,352
Trade and other payables
202,797
74,115
25,511
152,563
454,986
Borrowings
-
2,463,524 -
483,602
2,947,126
Decommissioning provision
766,573
35,525
Other current liabilities
(20,395)
-
-
-
32,941
802,098
12,546
Other non-current liabilities
134,203
180,689
24,663
(32,082)
307,473
Total liabilities
1,083,178 2,753,853 50,174
637,024
4,524,229
Other segment information
Capital Expenditure:
Property, plant and equipment
72,782
247,463
52,085
(14,330)
358,000
Intangible, exploration
and evaluation assets
40,523
6,342
215
3,329
50,409
Page 208 of 273
FINANCIAL STATEMENTS
Year ended 31 December 2020
($'000)
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
Oil & Gas properties
572,834
2,156,236 326,366
(1,728)
3,053,708
Other fixed assets
Intangible assets
21,727
765
27,588
139,267
89,607
39,219
3,484
7,723
Trade and other receivables
154,469 1,304
162,222
344
Deferred tax asset
103,200
-
22,856
-
53,564
275,816
318,339
126,056
Other assets
Total assets
251,240 37,464
247,028
(228,202)
307,530
1,242,737 2,285,376 825,279
(218,379)
4,135,013
Trade and other payables
187,117
76,146
57,959
34,232
355,454
Borrowings
121,264 1,093,965 -
227,847
1,443,076
Decommissioning provision
826,729 38,399
-
-
865,128
Other current liabilities
140,629 6,914
54,652
(195,280)
6,915
Other non-current liabilities
25,291
193,920 32,284
18,553
270,048
Total liabilities
1,301,030 1,409,344 144,895
85,352
2,940,621
Other segment information
Capital Expenditure:
Property, plant and equipment
14,117
405,279
860
Intangible, exploration
and evaluation assets
1,219
6,625
-
(197)
1,147
420,059
8,991
Segment cash flows
Year ended 31 December 2021
($’000)
Net cash from / (used in)
operating activities
Europe
Israel
Egypt
Other & inter-
segment
transactions
Total
43,394
(28,764) 128,659
(10,785)
132,504
Net cash (used in) investing activities (99,040)
(490,381) (53,553)
191
(642,783)
Net cash from financing activities
120,446
831,677
(132,414)
240,056
1,059,765
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at
beginning of the period
Effect of exchange rate fluctuations
on cash held
Cash and cash equivalents at end of
the period
64,800
312,532
(57,308)
229,462
549,486
13,609
37,421
76,240
75,669
202,939
(7,093)
(125)
322
(14,690)
(21,586)
71,316
349,828
19,254
290,441
730,839
Page 209 of 273
FINANCIAL STATEMENTS
Year ended 31 December 2020
(Restated) ($’000)
Net cash from / (used in)
operating activities
(5,442)
(2,469)
22,808
(13,428)
1,469
Net cash (used in) investing activities (18,626)
(370,007)
(925)
(208,005)
(597,563)
Net cash from financing activities
19,164
297,987
(174)
119,069
436,046
Net increase/(decrease) in cash and
cash equivalents
(4,904)
(74,489) 21,709
(102,364)
(160,048)
At beginning of the year
Cash acquired from business
Acquisition
6,084
7,234
110,488
-
237,847
354,419
-
55,650
(62,884)
-
5,195
1,422
(1,119)
3,070
8,568
13,609
37,421
76,240
75,669
202,939
Effect of exchange rate fluctuations
on cash held
Cash and cash equivalents at end of
the period
6
Business combination
Acquisition of Edison E&P
On 17 December 2020, the Group acquired 100% of the issued share capital and obtained control of
Edison Exploration & Production S.p.A (“Edison E&P”). Edison E&P contains a portfolio of assets including
producing assets in Egypt, Italy, the UK North Sea and Croatia with development assets in Egypt and Italy
and balanced-risk exploration opportunities across the portfolio. The acquisition of Edison E&P qualified
as a business combination as defined in IFRS 3.
The final fair values of the identifiable assets and liabilities of Edison E&P are unchanged from the
provisionally estimated amounts as at the date of acquisition.
($’000)
Assets:
Property, plant and equipment
Identifiable intangible assets
Inventory
Trade and other receivables127
Cash and cash equivalents
Deferred tax assets
Liabilities
Trade and other payables
Retirement benefit liability
Other long-term liabilities
Decommissioning liabilities
Fair value recognised on acquisition
689,188
133,786
68,977
336,081
62,884
70,832
1,361,748
(199,399)
(3,021)
(51,059)
(808,994)
127 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 loss
allowance recognised. As such it has been concluded that book value equates to fair values.
Page 210 of 273
($’000)
FINANCIAL STATEMENTS
Fair value recognised on acquisition
(1,062,473)
Total identifiable assets acquired and liabilities assumed
299,275
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
25,346
324,621
266,088
3,311
55,222
324,621
(266,088)
62,884
(203,204)
The base consideration payable of $398.6 million, which excludes contingent consideration, 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 from which amount of $266.6 million was paid in December
2020 and amount $3.3 million paid in January 2021.
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.
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 $299.3 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 was recognised upon acquisition. An amount of $22.9 million was due to the
requirement of IAS 12 to recognise deferred tax assets and liabilities for the difference between the
assigned fair values and tax bases of assets acquired and liabilities assumed. The assessment of fair
value of such licences is therefore based on cash flows after tax. Hence, goodwill arises as a direct result
of the recognition of this deferred tax adjustment (“technical goodwill”). None of the goodwill recognised
will be deductible for income tax purposes.
Page 211 of 273
7
Revenue
($’000)
Revenue from crude oil sales
Revenue from gas sales
Revenue from LPG sales
Revenue from condensate sales
Gain/(Loss) on forward transactions
Petroleum products sales
Rendering of services
Total revenue
FINANCIAL STATEMENTS
2021
165,924
270,969
20,945
34,126
(285)
4,618
688
2020
17,987
7,347
538
1,042
-
326
774
496,985
28,014
100% of the gas produced at Abu Qir (Egypt) is sold to EGPC under a Brent-linked gas price. At Brent
prices of between $40/bbl and $72/bbl the gas price is $3.5/mmBTU, limiting volatility and exposure to
commodity price fluctuations. For Brent prices above $72/bbl the gas price increases until it reaches a
cap of $5.88/mmBTU at Brent prices in excess of $100/bbl. For Brent prices below $40/bbl the gas price
decreases until it reaches a gas price floor of US$1.29/mmBTU at a Brent price of $0/bbl.
Sales for the year ended 31 December (Kboe)
2021
2020
Greece
Oil
Egypt (net entitlement)
Gas
LPG
Condensate
Italy
Oil
Gas
UK
Gas
Oil
Croatia
Gas
Total
403
639
6,351
394
553
2,083
1,474
40
271
57
425
32
64
62
65
5
17
3
11,626
1,312
Page 212 of 273
8
Operating profit/(loss)
($’000)
(a) Cost of sales
Staff costs (note 9)
Energy cost
Flux Cost
Royalty payable
Other operating costs128
Depreciation and amortisation (note 13)
Stock overlift/underlift movement
Total cost of sales
(b) Administration expenses
Staff costs (note 9)
Other General & Administration expenses
FINANCIAL STATEMENTS
2021
2020
64,564
11,578
11,561
24,759
149,133
94,647
(11,130)
345,112
16,759
15,444
14,562
5,310
430
8,227
22,052
(2,165)
48,416
5,745
4,584
2,776
780
1,251
Share-based payment charge included in administrative expenses 5,714
Depreciation and amortisation (note 13, 14)
Auditor fees (note 8g)
2,480
2,273
42,670
15,136
(c) Selling and distribution expense
Staff costs (note 9)
Other selling and distribution expenses
(d) Exploration and evaluation expenses
Staff costs for Exploration and evaluation activities (Note 9)
Exploration costs written off (Note 14)
Other exploration and evaluation expenses
(e) Other expenses
Transaction costs in relation to Edison E&P acquisition129
Intra-group merger costs
Loss from disposal of Property plant & Equipment
Other indemnities
Write-down of inventory
Provision for litigation and claims
Write down of property, plant and equipment costs
80
223
303
3,695
82,125
1,858
87,678
2,052
605
36
-
581
520
779
29
118
147
1,175
2,936
313
4,424
17,914
2,188
7,568
210
101
128 Other operating costs comprise of insurance costs, gas transportation and treatment fees concession fees and planned
maintenance costs.
129 Direct costs incurred in 2020 and 2021 relating to the acquisition of Edison’s E&P business.
Page 213 of 273
FINANCIAL STATEMENTS
($’000)
Other expenses
(f) Other income
Income from accounts payable written off130
Reversal of expected credit loss allowance
Change in estimates of decommissioning provisions131
Change in estimate of defined benefit obligation
Reversal of provision for litigation and claims
2021
2,446
7,019
-
1,853
7,836
3,463
4,494
Proceeds from termination of agreement with Neptune Energy132
-
Other income
(g) Fees to the Company’s auditor for:
The audit of the Company’s annual accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit services
Audit-related assurance services – half-year review
Reporting accountant services
Other services
238
17,884
748
783
1,531
242
1,008
75
2,856
2020
348
28,329
4,094
2
5,000
(94)
9,002
710
333
1,043
175
264
73
1,555
9
Staff costs
The average monthly number of employees (including Executive Directors) employed by the Group
worldwide was:
Number
Administration
Technical
2021
167
437
604
2020
99
307
406
In addition, the Group. consolidate the personnel costs of its Operating Company, Abu Qir Petroleum
Company (‘AQP’), owned at 100%. The table below details the average number of employees related to
AQP employees:
Number
AQP employee (excluding Energean employees)
2021
640
640
2020
25
25
130 Related to derecognition of specific accounts payables balances in the Greek subsidiary following waiver agreements
with creditors.
131 There was a change in the assumptions underpinning the decommissioning provision that resulted in an overall decrease to
the provisions recognised.
132 Related to termination fees paid by Neptune Energy following the termination of the agreement for Neptune Energy to acquire
Edison E&P’s UK and Norwegian subsidiaries from the Group.
Page 214 of 273
FINANCIAL STATEMENTS
($’000)
Salaries
Social security costs
Share-based payments (note 25)
Payroll cost capitalised in oil & gas assets and exploration &
evaluation costs
Payroll cost expensed
Included in:
Cost of sales (note 8a)
Administration expenses (note 8b)
Exploration & evaluation expenses (note 8d)
Selling and distribution expenses (note 8c)
Intra-group merger costs (note 8e)
Other
2021
94,624
11,995
5,933
112,552
(20,218)
2020
30,095
5,965
3,325
39,385
(12,109)
92,334
27,276
64,564
22,473
3,695
80
605
917
92,334
14,562
8,521
1,175
29
756
2,233
27,276
Details of Directors’ remuneration, Directors’ transactions and Directors’ interests are set out in the part
of the Directors’ Remuneration Report described as having been audited, which forms part of these
Consolidated Financial Statements.
10 Net finance cost
($’000)
Interest on bank borrowings
Interest on Senior Secure Notes
Interest expense on long term payables
Interest expense on short term liabilities
Notes
2021
2020
22
22
25
96,678
90,008
106,993
4,101
6,716
55
Less amounts included in the cost of qualifying assets
13,14
(174,153)
(93,581)
Finance and arrangement fees
Commission charges for bank guarantees
Unamortised financing costs related to Greek RBL and
Egypt RBL133
Other finance costs and bank charges
Loss on interest rate hedges
Unwinding of discount on right of use asset
33,674
12,420
2,404
18,108
2,972
7,002
1,316
3,143
4,042
-
-
744
-
919
133 On 18 November 2021 the Group fully repaid the Prinos Project Finance (Greek RBLs) before the maturity date of 31 December
2024 and, as such, the unamortised financing costs have been expensed in the period.
Page 215 of 273
($’000)
Notes
2021
Unwinding of discount on provision for decommissioning
Unwinding of discount on deferred consideration
Unwinding of discount on convertible loan
Mark-to-market on contingent consideration
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
($’000)
Corporation tax - current year
Corporation tax - prior years
Deferred tax (Note 15)
Total taxation (expense)/income
FINANCIAL STATEMENTS
8,722
12,854
3,159
1,626
2020
247
-
-
-
(6,877)
(4,109)
97,380
4,986
(2,950)
(2,950)
(493)
(493)
6,922
(15,445)
101,352
(10,952)
2021
2020
(44,922)
(1,171)
353
404
39,157
21,508
(5,412)
20,741
(b) Reconciliation of the total tax charge
The Group calculates its income tax expense by applying a weighted average tax rate calculated based
on the statutory tax rates of each country weighted according to the profit or loss before tax earned by
the Group in each jurisdiction where deferred tax is recognised or material current tax charge arises.
The effective tax rate for the period is 6% (31 December 2020: (18)%).
Page 216 of 273
FINANCIAL STATEMENTS
The tax (charge)/credit of the period can be reconciled to the loss per the consolidated income statement
as follows:
($’000)
Loss before tax
2021
2020
(90,742)
(113,599)
Tax calculated at 32.8% weighted average rate (2020: 24.9%)134
29,721
28,232
Impact of different tax rates
Utilisation of unrecognised deferred tax/
(Non recognition of deferred tax)
Permanent differences135
Foreign taxes
Tax effect of non-taxable income & allowances
Other adjustments
Prior year tax
Taxation (expense)/income
12
Loss per share
(5,176)
326
2,953
(2,544)
(34,470)
(5,251)
(244)
1,348
103
353
(1,081)
649
6
404
(5,412)
20,741
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 is calculated by dividing net income for the
year attributable to ordinary equity holders of the parent by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number of ordinary shares that would be
issued if dilutive employee share options were converted into ordinary shares. Given the reported loss for
the year, the effect of such outstanding shares is not dilutive.
($’000)
2021
2020
Total loss attributable to equity shareholders
(96,046)
(91,414)
Effect of dilutive potential ordinary shares
-
-
(96,046)
(91,414)
2021
2020
Basic weighted average number of shares
177,278,840
177,089,406
Dilutive potential ordinary shares
-
-
Diluted weighted average number of shares
177,278,840
177,089,406
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
$(0.54)/share
$(0.52)/share
$(0.54)/share
$(0.52)/share
134 For the reconciliation of the tax rate, the weighted average rate of the statutory tax rates in Greece (25%), Israel (23%), Italy
(24%), Cyprus (12.5%), United Kingdom (40%) and Egypt (40.55%) was used weighted according to the profit or loss before tax
earned by the Group in each jurisdiction, excluding fair value uplifts profits.
135 Permanent differences mainly consisted of non-deductible expenses, consolidation differences, intercompany dividends and
foreign exchange differences.
Page 217 of 273
FINANCIAL STATEMENTS
13 Property, plant & equipment
Property, Plant & Equipment at
Cost ($’000)
Oil and gas
assets136
Leased
assets137
Other property,
plant and
equipment
Total
At 1 January 2020
2,147,163
9,117
56,699
2,212,979
Additions
411,932
1,951
Acquisition of subsidiary
646,507
40,549
1,581
2,132
Lease modification
Disposal of assets
Capitalised borrowing cost
Capitalised depreciation
Change in
decommissioning provision
-
(1,519)
-
(4,795)
94,929
576
39,620
-
-
-
-
-
(5,328)
-
-
-
-
Transfer from Intangible assets
41,822
Foreign exchange impact
52,575
743
5,153
At 31 December 2020
3,430,329
50,841
60,237
Additions
Lease modification
Disposal of assets
345,180
-
(23)
Capitalised borrowing cost
178,891
Capitalised depreciation
Change in
decommissioning provision
227
(13,174)
Transfer from Intangible assets
14,317
6,428
2,261
-
-
-
-
-
1,623
-
(34)
-
-
-
26
Foreign exchange impact
(57,960)
(2,285)
(2,806)
415,464
689,188
(1,519)
(10,123)
94,929
576
39,620
41,822
58,471
3,541,407
353,231
2,261
(57)
178,891
227
(13,174)
14,343
(63,051)
At 31 December 2021
3,897,787
57,245
59,046
4,014,078
Accumulated Depreciation
At 1 January 2020
263,512
3,448
43,748
310,708
Charge for the period
Expensed
Impairments
18,105
3,073
64,727
-
Foreign exchange impact
30,299
458
At 31 December 2020
376,643
6,979
Charge for the period
2,149
572
4,044
50,513
23,327
65,299
34,801
434,135
Expensed
81,234
12,274
1,998
95,506
136 Included within the carrying amount of Oil & Gas assets are development costs of the Karish field related to the Sub Sea and
On-shore construction. In line with the agreement with Israel Natural Gas Lines (“INGL”), shortly after delivery of first gas there
will be a transfer of title (“hand over”) of these assets to INGL. For further details refer to note 25.
137 Included in the carrying amount of leased assets at 31 December 2021 is right of use assets related to Oil and gas properties
and Other property, plant and equipment of $25.1 million and $2.9 million respectively. The depreciation charged on these
classes for the year ending 31 December 2021 was $11.7 million and $0.6 million respectively.
Page 218 of 273
FINANCIAL STATEMENTS
Property, Plant & Equipment at
Cost ($’000)
Oil and gas
assets136
Leased
assets137
Other property,
plant and
equipment
Impairment
Disposal of assets
774
-
-
Foreign exchange impact
(16,129)
(151)
21
449
At 31 December 2021
442,522
19,102
52,981
Net carrying amount
Total
774
21
(15,831)
514,605
At 31 December 2020
3,053,686
43,862
At 31 December 2021
3,455,265
38,143
9,724
6,065
3,107,272
3,499,473
Borrowing costs capitalised for qualifying assets during the year are calculated by applying a weighted
average interest rate of 5.49% for the year ended 31 December 2021 (for the year ended 31 December
2020: 8.72%).
The additions to Oil & Gas properties for the year ended 31 December 2021 is mainly due to development
costs of Karish field related to the EPCIC contract (FPSO, Sub Sea and On-shore construction cost) at the
amount of $247 million, development cost for Cassiopea project in Italy at the amount of $38 million and
NEA/NI project in Egypt at the amount of $52 million.
Management assessed the CGUs in Egypt, Italy, Israel and the UK for indicators of impairment and none
were identified. In Greece management has performed a value in use (VIU) assessment of the Prinos
cash generating unit (CGU) following identification of triggers for impairment reversal. Management’s
assessment noted that Epsilon is currently in the development phase, and although robust technical
analysis supports production at the 2P level, given that the production of the first 3 wells has not
commenced, there is still significant uncertainty that the relevant production levels will be achieved; EU
Emissions Trading System (ETS) prices are set to increase, resulting in higher operational costs in Greece
and possible additional taxes for exceeding GHG emissions. These factors together with sensitivity
analysis performed resulted in management concluding that no impairment reversal was required.
Management will reassess the position once the Epsilon field starts producing.
During the year 2020 the Group executed an impairment test for the Prinos CGU (Prinos and Epsilon
fields). In that 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 resulted in an impairment of $65.3 million in the carrying value of
the Prinos CGU.
Page 219 of 273
Depreciation and amortisation for the year has been recognised as follows:
FINANCIAL STATEMENTS
($'000)
Cost of sales (note 8a)
Administration expenses (note 8b)
Other operating (income)/expenses
Capitalised depreciation in oil & gas properties
Total
Cash flow statement reconciliations:
2021
2020
94,647
22,052
2,480
97
227
780
1,293
576
97,451
24,701
Payment for additions to property, plant and equipment ($’000)
2021
2020
Additions to property, plant and equipment
521,435
550,589
Associated cash flows
Payment for additions to property, plant and equipment
(403,503)
(403,968)
Non-cash movements/presented in other cash flow lines
Borrowing cost capitalised
(178,891)
(94,929)
Right-of-use asset additions/modifications
Lease payments related to capital activities
Capitalised share-based payment charge
Capitalised depreciation
Change in decommissioning provision
Movement in working capital
(8,689)
10,852
(200)
(227)
13,174
46,049
(1,951)
6,645
(99)
(576)
(39,620)
(16,091)
14
Intangible assets
($’000)
Intangibles at Cost
At 1 January 2020
Additions
Acquisition of subsidiary
Exploration and
evaluation assets Goodwill
Other
Intangible
assets
Total
71,601
8,379
115,438
75,800
1,941
149,342
-
612
8,991
25,346
18,348
159,132
Capitalised borrowing costs
2,761
Transfers to property, plant
and equipment
Exchange differences
31 December 2020
Additions
Capitalised borrowing costs
Change in
decommissioning provision
(41,822)
1,856
158,213
47,995
2,202
2,141
-
-
-
-
-
2,761
(41,822)
1,454
3,310
101,146
22,355
281,714
-
-
2,413
50,408
-
2,202
2,141
Page 220 of 273
FINANCIAL STATEMENTS
Other
Intangible
assets
Total
(14,078)
(14,343)
(983)
9,707
1,405
1,375
-
114
2,894
1,946
-
(74)
4,766
(5,936)
316,186
1,666
1,375
2,936
(79)
5,898
1,946
82,125
(1,924)
88,045
($’000)
Transfers to property, plant
and equipment
Exchange differences
At 31 December 2021
Exploration and
evaluation assets Goodwill
(265)
(4,953)
205,333
-
-
101,146
Accumulated amortisation and impairments
261
-
2,936
(193)
3,004
82,125
(1,850)
83,279
-
-
-
-
-
-
-
-
-
At 1 January 2020
Charge for the period
Impairment
Exchange differences
31 December 2020
Charge for the period
Impairment
Exchange differences
31 December 2021
Net carrying amount
At 31 December 2020
At 31 December 2021
155,209
122,054
101,146
19,461
101,146
4,941
275,816
228,141
Cash flow statement reconciliations:
Payment for additions to intangible assets ($’000)
Additions to intangible assets
Associated cash flows
2021
2020
54,750
11,753
Payment for additions to intangible assets
(48,674)
(15,041)
Non-cash movements/presented in other cash flow lines
Borrowing cost capitalised
Change in decommissioning provision
Movement in working capital
(2,141)
(2,202)
(1,733)
(2,761)
-
6,049
Borrowing costs capitalised for qualifying assets for the year ended 31 December 2021 amounted to
$2.1 million (31 December 2020: $2.8 million). The interest rates used was 5.49% for the year ended 31
December 2021 (31 December 2020: 8.72%).
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.
In 2021 two appraisal wells were drilled targeting Glengorm South and Glengorm Central. Both wells were
unsuccessful and did not find hydrocarbons. All wells have been plugged and abandoned. Therefore the
related costs of the unsuccessful wells and the associated fair value uplift recognised as part of the
Edison E&P acquisition (as discussed in note 6) were impaired ($79.8 million).
Page 221 of 273
FINANCIAL STATEMENTS
15 Net deferred tax (liability)/asset
Deferred tax
(liabilities)/assets ($’000)
Property,
plant and
equipment
Right of
use asset
IFRS 16
Decom-
missioning
Prepaid
expenses
and other
receivables
Inventory
Tax
losses
Deferred
expenses
for tax
Retirement
benefit
liability
Accrued
expenses and
other
short-term
liabilities
At 1 January 2020
(137,998)
(1,078)
-
(971)
733
90,412
-
913
7,646
Acquisition of subsidiary
(Note 6)
10,080
Increase / (decrease) for the
period through:
60,752
Profit or loss (Note 11)
8,381
819
8,877
(3,474)
(98)
7,384
Other
comprehensive income
-
-
Exchange difference
(4,006)
(33)
-
-
31 December 2020
(123,543)
(292)
8,877
(4,651)
Increase / (decrease) for the
period through:
130
-
-
(336)
60
695
7,293
-
165,841 -
53
-
84
(434)
1,603
655
1,050
9,470
Total
(40,343)
70,832
21,508
1,733
3,717
57,447
Profit or loss (Note 11)
9,848
(718)
50,808
890
(254)
(32,501) 5,020
(932)
6,996
1,586
39,157
1,586
(28,442)
33,644
2,025
(233)
(4,903)
6, 010
200
(8,301)
-
Exchange difference
1,584
20
(3,889)
165
31 December 2021
(140,553)
(990)
89,440
(1,571)
(25)
183
(8,257)
120,180 11,030
(52)
266
(363)
9,388
(10,817)
87,373
138 These reclassifications primarily relate to the assets and liabilities acquired in the Edison E&P acquisition which completed in December 2020 and reflect updated information on the allocation of the
deferred taxes across the relevant categories.
Page 222 of 273
Other
comprehensive income
Reclassifications in the
current period138
FINANCIAL STATEMENTS
($'000)
Deferred tax liabilities
Deferred tax assets
2021
(67,425)
154,798
87,373
2020
(68,609)
126,056
57,447
At 31 December 2021 the Group had gross unused tax losses of $1,123.8 million (as of 31 December
2020: $783.6 million) available to offset against future profits and other temporary differences. A deferred
tax asset of $120.2 million (2020: $165.8 million) has been recognised on tax losses of $449.0 million,
based on the forecasted profit models as updated with the 31 December 2021 proved and probable
reserve profiles. The Group did not recognise deferred tax on tax losses and other differences of total
amount of $1,090.4 million.
In Greece, Italy and the UK, the net deferred tax asset for carried forward losses recognised in excess of
the other net taxable temporary differences was $59.3 million, $0.19 million and $13.8 million (2020:
$58.7 million, $20.6 million and $4.2 million) respectively. An additional deferred tax asset of $81.4 million
(2020: $42.6 million) arose primarily in respect of deductible temporary differences related to property,
plant and equipment, decommissioning provisions and accrued expenses, resulting in a total deferred
tax asset of $154.9 million (2020: $126.1 million).
Greek tax losses (Prinos area) can be carried forward without limitation up until the relevant concession
agreement expires (by 2039), whereas, the tax losses in Israel, Italy and the United Kingdom can be
carried forward indefinitely. Based on the Prinos area forecasts (including the Epsilon development), the
deferred tax asset is fully utilised by 2029. In Italy, deferred tax asset of $67.9 million recognised on
decommissioning costs scheduled up to 2030 when the Italian assets expect to enter into a declining
phase. Finally, in the UK, decommissioning losses is expected to be tax relieved up until 2027, whereas,
deferred tax asset recognised on UK tax losses is fully offset against deferred tax liabilities on
temporary differences.
On 3 March 2021 it was announced in the UK budget that the UK non-ring fence corporation tax rate will
increase from 19% to 25% with effect from 2023. The Group does not currently recognise any deferred
tax assets in respect of UK non-ring fence tax losses and therefore this rate change did not impact the
tax disclosures.
16 Cash and cash equivalents
($'000)
Cash at bank
Deposits in escrow
2021
729,390
1,449
730,839
2020
197,514
5,425
202,939
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 0.386% for the year ended 31 December 2021 (year ended 31 December 2020: 1.07%).
Deposits in escrow comprise mainly cash retained as a bank security pledge for the Group’s performance
guarantees in its exploration blocks. These deposits can be used for funding the exploration activities of
the respective blocks.
Page 223 of 273
FINANCIAL STATEMENTS
17 Restricted cash
Restricted cash comprises mainly cash retained under the Israel Senior Secured Notes requirement
as follows:
• Short term - $96.76 million Interest Payment Account for the accrued interest period until 31
December 2022 (less coupons actually paid) and from 31 December 2022 the Interest Reserve
Account will be funded 6 months forward
• Long term - $100 million Debt Payment Fund that would be released upon achieving three quarters
annualised production of 3.8 BCM/year from Karish asset in Israel.
The remaining amount of $2.96 million included in restricted cash is related to cash collateral provided
under a letter of credit facility for issuing bank guarantees for Group’s activities in Israel up to $75 million.
18
Inventories
($’000)
Crude oil
Raw materials and supplies
Total inventories
2021
32,832
54,371
87,203
2020
16,946
56,073
73,019
The Group’s raw materials and supplies consumption for the year ended 31 December 2021 was
$6.5 million (year ended 31 December 2020: $1.3 million).
The Group recorded impairment and write-off charges on inventory of $0.6 million for the year ended 31
December 2021 (year ended 31 December 2020: $0.1 million) related to materials written off (note 8e).
Page 224 of 273
19
Trade and other receivables
($’000)
2021
2020
FINANCIAL STATEMENTS
Trade and other receivables - Current
Financial items:
Trade receivables139
Receivables from partners under JOA
Other receivables140
Government subsidies141
Refundable VAT
178,804
5,138
38,683
3,212
42,376
Receivables from related parties (note 28)
1
Non-financial items:
Deposits and prepayments142
Deferred insurance expenses
Accrued interest income
Trade and other receivables - Non-Current
Financial items:
Other tax recoverable
Non-financial items:
Deposits and prepayments
Other deferred expenses143
Other non-current assets
268,214
17,139
2,095
1,078
20,312
288,526
16,478
16,478
12,337
22,958
866
36,161
52,639
226,118
3,481
49,414
22
279,035
38,756
507
41
39,304
318,339
16,686
16,686
13,409
-
1,473
14,882
31,568
139 Included within this balance is an amount of $21.2 million receivable from INGL as a result of the relevant milestones being
achieved, in line with the agreement. Refer to note 25 for further details on the agreement with INGL.
140 Included in other receivables is $29.4 million cash on account in relation to the hedges in Italy.
141 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.
142 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.
143 In accordance with the GSPAs signed with a group of gas buyers, the Company has agreed to pay compensation to these
counterparties due to the fact the gas supply date is taking place beyond a certain date as defined in the GSPAs (being 30 June
2021). The compensation, amounting to $23 million) has been fully paid as of the reporting date. The compensation presented
as a non-current asset (under the caption deferred expenses) and will be accounted for as variable consideration in line with
IFRS 15 once production commences and gas is delivered to the offtakers.
Page 225 of 273
FINANCIAL STATEMENTS
The table below summarises the maturity profile of the Group receivables:
31 December 2021
($’000)
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12
months
1-2 years
2-5 years
Trade receivables
178,804
178,804
2,832
175,972
Government
subsidies
3,212
3,212
3,212
Refundable VAT
42,376
42,376
Receivables from
partners under JOA
5,138
5,138
1,774
5,138
40,602
-
Other receivables
38,683
38,683
36,105
2,578
Other
tax recoverable
16,478
16,478
-
-
Total
284,691
284,691
45,849
222,364
-
-
-
-
-
-
-
-
-
-
-
-
16,478
16,478
31 December 2020
($’000)
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12
months
1-2 years
2-5 years
Trade receivables
226,118
226,118
92,194
133,924
Government
subsidies
3,481
3,481
-
3,481
Refundable VAT
49,414
49,414
34,618
14,796
16,686
16,686
-
-
295,699
295,699
126,812
152,201
Other tax
recoverable
Total
20
Share capital
-
-
-
-
-
-
-
-
16,686
16,686
On 30 June 2017, the Company became the parent company of the Group through the acquisition of the
full share capital of Energean E&P Holdings Limited, in exchange for 65,643,120 £0.01 ($0.013) shares in
the Company issued to the previous shareholders. As of this date, the Company’s share capital increased
from £50 thousand ($65k) to £706 thousand ($917k). From that point, in the consolidated financial
statements, the share capital became that of Energean plc. The previously recognised share capital of
$14.9 million and share premium of $125.8 million was eliminated with a corresponding positive merger
reserve recognised of $139.9 million. The below tables outline the share capital of the Company.
Issued and authorised
Equity share
capital allotted
and fully paid
Share capital
($’000)
Share premium
($’000)
At 1 January 2020 and at 31 December 2020
177,089,406
2,367
915,388
Issued during the year
- New shares
- Share based payment
At 31 December 2021
-
513,154
-
7
-
-
177,602,560
2,374
915,388
Page 226 of 273
FINANCIAL STATEMENTS
21 Non-controlling interests
Voting rights
(%)
Share of loss
($’000)
Accumulated balance
($’000)
Year
ended 31
December
2021
Year
ended 31
December
2020
Year
ended 31
December
2021
Year
ended 31
December
2020
Year
ended 31
December
2021
Year
ended 31
December
2020
-
-
30.00
30.00
(106)
(106)
(3,173)
(3,173)
-
-
266,299
266,299
Name of subsidiary
Energean Israel Ltd
Total
Material partly-owned subsidiaries
Energean Israel Limited
On 25 February 2021, the Group completed the acquisition of the remaining 30% minority interest in
Energean Israel Limited from Kerogen Investments No.38 Limited, Energean now owns 100% of
Energean Israel Limited.
This resulted in a reduction of the Group’s reported non-controlling interest balance to $nil as at that date.
The Total Consideration includes:
• An up-front payment of $175 million (the “Up-Front Consideration”) paid at completion of
the transaction
• Deferred cash consideration amounts totalling $180 million, which are expected to be funded from
future cash flows and optimisation of the group capital structure, post-first gas from the Karish
project. The deferred consideration is discounted at the selected unsecured liability rate of 9.77%.
• $50 million of convertible loan notes (the “Convertible Loan Notes”), which have a maturity date of 29
December 2023, a strike price of £9.50 and a zero-coupon rate
Following is a schedule of additional interest acquired in Energean Israel Limited:
Cash consideration paid to non-controlling shareholders at completion
Deferred cash consideration
Convertible Loan Notes - Liability Component
Convertible Loan Notes - Equity Instrument Component
Cost related to the transaction
Carrying value of the 30% minority interest
Difference recognised in retained earnings
$'000
175,000
154,499
38,337
10,459
1,677
(266,193)
113,779
The Acquisition of the remaining 30% minority interest in Energean Israel added 2P reserves of 29.5 billion
cubic metres ("Bcm") of gas and 30 million barrels of liquids, representing approximately 219 million
barrels of oil equivalent ("MMboe") in total, to the Group.
The summarised financial information of Energean Israel Limited for the year ended 31 December 2020,
is provided below. This information is based on amounts before inter-company eliminations.
Page 227 of 273
Summarised statement of financial position as at 31 December 2020:
FINANCIAL STATEMENTS
($’000)
Current assets
Non current assets
Current liabilities
Non-current liabilities
Total equity
Summarised statement of profit or loss for 2020:
($’000)
Administration expenses
Exploration and evaluation expenses
Other expenses
Operating loss
Finance income
Finance costs
Loss for the year before tax
Tax income
Net loss for the period
Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Cash Flow hedge, net of tax
Tax relating to items that may be reclassified subsequently to profit or loss
Other comprehensive (loss)/income
Total comprehensive income/(loss) for the period
2020
38,725
2,178,689
(1,207,374)
(122,759)
887,281
2020
(3,909)
(502)
(2,701)
(7,112)
2,063
(326)
(5,375)
495
(4,880)
(7,483)
1,721
(5,762)
(10,642)
Page 228 of 273
22 Borrowings
($’000)
Non-current
Bank borrowings - after two years but within five years
4.5% Senior Secured notes due 2024 ($625 million)
4.875% Senior Secured notes due 2026 ($625 million)
Senior Credit facility ($237 million)
EBRD Senior Facility Loan ($180 million)
EBRD Subordinated Facility Loan ($20 million)
Convertible loan notes ($50 million) – (note 19)
Bank borrowings - more than five years
6.5% Senior Secured notes due 2027 ($450 million)
5.375% Senior Secured notes due 2028 ($625 million)
5.875% Senior Secured notes due 2031 ($625 million)
FINANCIAL STATEMENTS
2021
2020
617,060
615,966
-
-
-
-
-
41,495
442,107
615,451
615,047
227,848
84,420
17,824
-
-
-
-
Carrying value of non-current borrowings
2,947,126
330,092
Current
6.83% EBRD Senior Facility Loan due 2024 ($97,6 million)
Senior Credit Facility for the Karish-Tanin Development ($1,450 million)
Carrying value of current borrowings
-
-
-
19,020
1,093,964
1,112,984
Carrying value of total borrowings
2,947,126
1,443,076
The Group has provided security in respect of certain borrowings in the form of share pledges, as well as
fixed and floating charges over certain assets of the Group.
$2,500,000,000 senior secured notes:
On 24 March 2021, the Group completed the issuance of $2.5 billion aggregate principal amount of senior
secured notes.
The Notes have been issued in four series as follows:
• Notes in an aggregate principal amount of $625 million, maturing on 30 March 2024, with a fixed
annual interest rate of 4.500%.
• Notes in an aggregate principal amount of $625 million, maturing on 30 March 2026, with a fixed
annual interest rate of 4.875%.
• Notes in an aggregate principal amount of $625 million, maturing on 30 March 2028, with a fixed
annual interest rate of 5.375%.
• Notes in an aggregate principal amount of $625 million, maturing on 30 March 2031, with a fixed
annual interest rate of 5.875%.
The interest on each series of the Notes is payable semi-annually, on 30 March and on 30 September of
each year, beginning on 30 September 2021.
Page 229 of 273
FINANCIAL STATEMENTS
On 29 April 2021 the Group satisfied the escrow release conditions in respect of its $2.5 billion aggregate
principal amount of the Notes offering. As a result of satisfying the said escrow release conditions, the
proceeds of the Offering were released from escrow.
The Notes are listed for trading on the TACT Institutional of the Tel Aviv Stock Exchange Ltd. (the “TASE”).
The use of proceeds from the Offering is as follows:
• To repay outstanding Senior Credit Facility for the Karish-Tanin Development facility and outstanding
amount under a $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 Company had undertaken to provide the following collateral in favour of the Trustee:
• First rank Fixed charges over the shares of Energean Israel Limited, Energean Israel Finance Ltd and
Energean Israel Transmission Ltd, the Karish & Tanin Leases, the gas sales purchase agreements
(“GSPAs”), several bank accounts, Operating Permits (once issued), Insurance policies, the Company
exploration licenses (Block 12, Block 21, Block 23, Block 31 and 80% of the licenses under “Zone D”)
and the INGL Agreement.
• Floating charge over all of the present and future assets of Energean Israel Limited and Energean
Israel Finance Ltd.
• Energean Power FPSO (subject to using commercially reasonable efforts, including obtaining Israel
Petroleum Commissioner approval and any other applicable governmental authority).
Senior Credit Facility for the Karish-Tanin Development:
On 29 April 2021, following the release of the senior secured notes proceeds of $2.5bn, the Company
repaid its existing outstanding facility.
$450,000,000 senior secured notes:
On 18th November 2021, the Group completed the issuance of $450 million of senior secured notes,
maturing on 30 April 2027 and carrying a fixed annual interest rate of 6.5%.
The interest on the notes is paid semi-annually on 30 April and 30 October of each year, beginning on 30
April 2022.
The notes are listed for trading on the Official List of the International Stock Exchange (“TISE”).
The use of proceeds from the Offering is as follows:
• To repay all amounts outstanding under, and cancel all commitments made available pursuant to
certain of its existing debt facilities, being the Egypt reserve-based lending facility and the Greek
reserve-based lending facility plus subordinated debt;
• To pay fees and other expenses related to the Offering; and
• For general corporate purposes of the Group
The issuer is Energean plc and the Guarantors are Energean E&P Holdings, Energean Capital Ltd,
Energean Egypt Ltd, and Energean Egypt Services JSC.
The company undertook to provide the following collateral in favour of the Security Trustee:
• Share pledge of Energean Capital Ltd, Energean Egypt Ltd, Energean Italy Ltd and Energean Egypt
Services JSC
• Fixed charges over the material bank accounts of the Company and the Guarantors (other than
Energean Egypt Services JSC)
• Floating charge over the assets of Energean plc (other than the shares of Energean E&P Holdings)
Page 230 of 273
FINANCIAL STATEMENTS
EBRD Senior Facility, EBRD Subordinated Facility, New Egypt RBL Facility:
On 18 November 2021, following the release of the senior secured notes proceeds of $450 million, the
Company repaid its existing debt facilities, being the New Egypt reserve based lending facility and the
Greek reserve based lending facility plus subordinated debt.
Energean Oil and Gas SA (‘EOGSA') loan for Epsilon/Prinos Development:
On 27 December 2021 EOGSA entered into a loan agreement with Black Sea Trade and Development
Bank for €90.5 million to fund the development of Epsilon Oil Field. The loan is subject to an interest rate
of 3,45 % plus EURIBOR, in addition to fees and commission and has final maturity date 7 years and 11
months after the First Disbursement Date.
On 27 December 2021 EOGSA entered into an agreement with Greek State to issue €9.5 million of notes
maturing in 8 years with fix rate 0,31% plus margin as the following table:
Year
Margin
1
2
3
4
5
6
7
8
3.0%
3.5%
3.5%
4.5%
4.5%
4.5%
5.5%
6.5%
Capital management
The Group defines capital as the total equity and net debt of the Group. Capital is managed in order to
provide returns for shareholders and benefits to stakeholders and to safeguard the Group’s ability to
continue as a going concern.
Energean is not subject to any externally imposed capital requirements. To maintain or adjust the capital
structure, the Group may put in place new debt facilities, issue new shares for cash, repay debt, engage
in active portfolio management, adjust the dividend payment to shareholders, or undertake other such
restructuring activities as appropriate.
($’000)
Net Debt
Current borrowings
Non-current borrowings
Total borrowings
Less: Cash and cash equivalents
Restricted cash
Net Debt (1)
Total equity (2)
Gearing Ratio (1)/(2):
2021
2020
-
2,947,126
2,947,126
(730,839)
(199,729)
2,016,558
717,123
281.2%
1,112,984
330,092
1,443,076
(202,939)
-
1,240,137
1,194,392
103.8%
Page 231 of 273
FINANCIAL STATEMENTS
Reconciliation of liabilities arising from financing activities
($'000)
2021
1 January
Cash
inflows
Cash
outflows
Reclass-
ification
1,622,354
3,243,000
(2,006,761)
(35,373)
Senior Secured Notes
Convertible loan notes (note 19)
-
-
2,950,000
(115,717)
(35,640)
-
-
-
Long -term borrowings
330,092
175,000
(537,873)
(1,713)
Current borrowings
1,112,984
118,000
(1,320,989) 2,080
Lease liabilities
Deferred licence payments
Contingent Consideration
Deferred consideration of
acquisition of minority
47,623
69,518
55,222
-
Derivatives not designated as
hedging instruments
6,915
-
-
-
-
(10,852)
(14,344)
-
(6,986)
-
-
-
-
Acquisition
of
subsidiary Additions
Lease
modification
Borrowing
costs
including
amortisation
of
arrangement
fees
Derivatives de-
designated as
cash flow
hedges during
the period
Foreign
exchange
impact
Fair value
changes
31
December
-
-
-
-
-
-
-
-
-
187,778
2,261
251,471
4,641
8,691
28,843
3,307,005
-
38,337
-
-
-
-
-
-
6,304
2,261
-
143,137
-
-
-
-
106,988
3,158
35,277
87,460
1,316
2,056
12,855
-
(783)
465
(2,227)
-
-
-
-
-
2,905,631
41,495
-
-
44,425
57,230
23,228
78,450
11,236
-
167,228
2,361
4,641
-
5,615
12,546
2020
999,551
557,000
(140,621)
(1,130)
43,347
57,173
(1,519)
100,522
Long -term borrowings
877,931
237.000
(53,033)
(740,579)
-
-
-
Current borrowings
38,052
320,000
(61,437)
735,649
8,669
80,720
Lease liabilities
6,111
Deferred licence payments
78,139
-
-
Contingent consideration
Derivatives not designated as
hedging instruments
(682)
(6,644)
3,800
43,347
1,951
(1,519)
247
(14,843)
(4,664)
55,222
6,222
-
4,664
434
104
330
7,597
1,622,354
-
1,112,984
330,092
47,623
69,518
55,522
7,597
6,915
Page 232 of 273
FINANCIAL STATEMENTS
23 Retirement benefit liability
The Group operates defined benefit pension plans in Greece and Italy.
Under Italian law, Energean Italy Spa is required to operate a Target Retirement Fund “TFR” for its local
employees. This is technically a defined benefit scheme, though has no pension assets, with the liability
measured by independent actuaries.
In accordance with the provisions of Greek labour law, employees are entitled to compensation in case
of dismissal or retirement. The amount of compensation varies depending on salary, years of service and
the manner of termination (dismissal or retirement). Employees who resign are not entitled to
compensation. The compensation payable in case of retirement is equal to 40% of the compensation
which would be payable in case of unjustified dismissal.
These plans are not funded and are defined benefit plans in accordance with IAS 19. The Group charges
the accrued benefits in each period with a corresponding increase in the relative actuarial liability. The
payments made to retirees in every period are charged against this liability. The liabilities of the Group
arising from the obligation to pay termination indemnities are determined through actuarial studies,
conducted by independent actuaries.
23.1 Provision for retirement benefits
($’000)
Defined benefit obligation
Provision for retirement benefits recognised
Allocated as:
Non-current portion
23.2 Defined benefit obligation
($’000)
At 1 January
Change in estimate144
Acquisition of subsidiary
Current service cost
Interest cost
Extra payments or expenses
Actuarial losses - from changes in financial assumptions
Benefits paid
Transfer in/(out)
Exchange differences
At 31 December
2021
2,767
2,767
2,767
2,767
2021
7,839
(3,463)
-
191
13
775
162
(2,314)
(34)
(402)
2,767
2020
7,839
7,839
7,839
7,839
2020
4,265
3,021
364
39
557
49
(866)
410
7,839
144 During the year there was a change in the defined benefit estimate in Greece, specifically in relation to the periods of service to
which an entity attributes benefit.
Page 233 of 273
FINANCIAL STATEMENTS
23.3 Actuarial assumptions and risks
The most recent actuarial valuation was carried out as of 31 December 2021 and it was based on the
following key assumptions:
Greece
Discount rate
Expected rate of salary increases
2021
2020
2.00%
3.84%
1.70%
3.54%
Average life expectancy over retirement age
19.4 years
19.4 years
Inflation rate
Italy
Discount rate
Expected rate of salary increases
Average life expectancy over retirement age
Inflation rate
Sensitivity analysis
2.00%
1.84%
0.94%
N/A
20.9
2.00%
-
-
-
-
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.
2021
2020
Greece
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
Change -0.5% in Expected rate of salary increases
Italy
Percentage Effect on defined benefit obligation
Change + 0.5% in Discount rate
Change – 0.5% in Discount rate
-3%
3%
3%
-3%
-1%
1%
-9%
9%
8%
-8%
-
-
Greece
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
2021
2020
-4%
4%
5%
-5%
-12%
12%
12%
-12%
Page 234 of 273
FINANCIAL STATEMENTS
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.
Page 235 of 273
24 Provisions
($'000)
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
At 1 January 2021
New provisions
Change in estimates
FINANCIAL STATEMENTS
Decommissioning
Provision for
litigation and
other claims
13,145
38,125
1,496
-
808,994
919
2,448
133
-
-
(145)
16,375
-
45
Total
13,278
38,125
1,496
(145)
825,369
919
2,493
865,127
16,408
881,535
-
-
-
865,127
16,408
881,535
(18,808)
520
(4,494)
520
(23,302)
Recognised in property, plant and equipment
(13,174)
Recognised in Intangible assets
Recognised in profit& loss
Payments
Unwinding of discount
Currency translation adjustment
At 31 December 2021
Current provisions
Non-current provisions
Decommissioning provision
2,202
(7,836)
(2,653)
8,722
(50,290)
802,098
12,366
789,732
-
-
(1,140)
11,294
-
11,294
(2,653)
8,722
(51,430)
813,392
12,366
801,026
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 and the impact of energy transition
and the pace at which it progresses which are inherently uncertain.
The decommissioning provision represents the present value of decommissioning costs relating to
assets in Italy, Greece, UK, Israel and Croatia. No provision is recognised for Egypt as there is no legal or
constructive obligation as at 31 December 2021.
Page 236 of 273
FINANCIAL STATEMENTS
Inflation
assumption
Discount rate
assumption
Cessation of
production
assumption
2021 ($'000)
2020 ($'000)
Greece
1.2%- 1.6%
0.89%
2034
17,058
1.07%- 1.37%
1.23%
2022-2040
527,801
2.5%
2.2%
1.8%
1.49%
1.95%
1.25%
2023-2031
203,246
2041
2022
35,525
18,467
Italy
UK
Israel
Croatia
Total
16,082
551,464
239,708
38,399
19,474
802,097
865,127
Litigation and other claims provisions
Litigation and other claim provision relates to litigation actions currently open in Italy with the Termoli
Port Authority in respect of the fees payable under the marine concession regarding FSO Alba Marina
serving the Rospo Mare field in Italy. Energean Italy Spa has appealed these cases to the Campobasso
Court of Appeal. None of the other cases has yet had a decision on the substantive issue. The Group
provided €5.6 million (c$6.3 million) against an adverse outcome of these court cases.
Energean Italy Spa has currently open litigations with three municipalities in Italy related to the imposition
of real estate municipality taxes (IMU/TASI), interest and related penalties concerning the periods 2016
to 2019. For the years before 2019, Edison SpA bears uncapped liability for any amount assessed
according to the sale and purchase agreement (SPA) signed between the companies while Energean is
liable for any tax liability related to tax year 2019. For all three cases, Energean Italy SpA (together with
Edison SpA, as appropriate) filed appeals presenting strong legal and technical arguments for reducing
the assessed taxes to the lowest possible level as well as cancelling entirely the imposed penalties. The
Group strongly believes based on legal advice received that the outcome of the court decisions will be in
its favour with no material exposure expected in excess of the provision of $2.3 million recognised.
Other provisions include non-income tax provisions and a potential claim in Egypt.
It is not currently possible to accurately predict the timing of the settlement of these claims and therefore
the expected timing of the cash flows.
25
Trade and other payables
($’000)
2021
2020
Trade and other payables-Current
Financial items:
Trade accounts payable
Payables to partners under JOA145
109,525
43,499
Deferred licence payments due within one year
-
193,987
64,752
14,344
Deferred consideration for acquisition of minority
167,228
-
Other creditors
Short term lease liability
12,043
8,253
340,548
12,502
10,561
296,146
145 Payables related to operated Joint operations primarily in Italy.
Page 237 of 273
($’000)
Non-financial items:
Accrued expenses146
Other finance costs accrued (note 10)
Social insurance and other taxes
Income taxes
Trade and other payables-Non-Current
Financial items:
Deferred licence payments147
Contingent consideration (note 27)
Long term lease liability
Other payables
Non-financial items:
Contract Liability148
Social insurance
FINANCIAL STATEMENTS
2021
2020
64,823
36,693
7,643
5,279
114,438
454,986
57,230
78,450
36,172
49,812
2,630
5,695
1,171
59,308
355,454
55,174
55,222
37,062
171,852
147,458
53,537
598
54,135
225,987
29,105
630
29,735
177,193
Trade and other payables are non-interest bearing except for finance
licence payments.
leases and deferred
146 Included in trade payables and accrued expenses in FY21 and FY20, are mainly Karish field related development expenditures
(mainly FPSO and Sub Sea construction cost), development expenditure for Cassiopea project in Italy and NEA/NI project
in Egypt.
147 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 2021 the total discounted deferred consideration was $57.23 million (as at 31 December 2020:
$69.52 million). The Sale and Purchase Agreement (“SPA”) includes provisions in the event of Force Majeure that prevents or
delays the implementation of the development plan as approved under one lease for a period of more than ninety (90) days in
any year following the final investment decision (“FID”) date. In the event of Force Majeure the applicable annual payment of
the remaining consideration will be postponed by an equivalent period of time, and no interest will be accrued in that period of
time as well. Due to the effects of the COVID-19 pandemic which constitute a Force Majeure event, the deferred payment due
in March 2022 would be postponed by the number of days that such Force Majeure event last. As of 31 December 2021 Force
Majeure event length has not been finalised as the COVID-19 pandemic continues to affect the progress of the project, and as
such the deferred payment due in March 2022 will be postponed accordingly.
148 In June 2019, Energean signed a Detailed Agreement with Israel Natural Gas Lines (“INGL”) for the transfer of title (the “hand
over”) of the nearshore and onshore part of the infrastructure that will deliver gas from the Karish and Tanin FPSO into the
Israeli national gas transmission grid. As consideration, INGL will pay Energean 369 million Israeli new shekel (ILS), c$115
million for the infrastructure being built by Energean which will be paid in accordance with milestones detailed in the agreement.
The agreement covers the onshore section of the Karish and Tanin infrastructure and the near shore section of pipeline
extending to approximately 10km offshore. It is intended that the hand over to INGL will become effective at least 90 days after
the delivery of first gas from the Karish field which expected in Q3 2022.
Page 238 of 273
FINANCIAL STATEMENTS
26
Employee share schemes
Analysis of share-based payment charge
($’000)
Energean DSBP Plan
Energean Long Term Incentive Plan
Total share-based payment charge
Capitalised to intangible and tangible assets
Expensed as cost of sales
Expensed as administration expenses
Expensed to exploration and evaluation expenses
Expensed as other expenses
Total share-based payment charge
Energean Long Term Incentive Plan (LTIP)
2021
1,215
4,718
5,933
200
5
5,712
14
2
5,933
2020
693
2,632
3,325
99
2,776
442
8
3,325
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 2021 was
1.3 years (31 December 2020: 1.4 years), number of shares outstanding 2,036,982 and weighted average
price at grant date £5.99.
There are further details of the LTIP in the Remuneration Report on pages 133-159.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, the portion of any annual bonus above 30% of the base salary of a Senior Executive
nominated by the Remuneration Committee 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 2021 was
0.8 years, number of shares outstanding 234,902 and weighted price at grant date £6.75.
27
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.
Page 239 of 273
FINANCIAL STATEMENTS
27.1 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 categorised in level 2 of the fair value hierarchy.
Contingent consideration
The share purchase agreement (the “SPA”) dated 4 July 2019 between Energean and Edison SpA
provides for a contingent consideration of up to $100.0 million subject to the commissioning of the
Cassiopea development gas project in Italy. The consideration was determined to be contingent on the
basis of future gas prices (PSV) recorded at the time of the commissioning of the field, which is expected
in 2024. No payment will be due if the arithmetic average of the year one (i.e., the first year after first gas
production) and year two (i.e., the second year after first gas production) Italian PSV Natural Gas Futures
prices is less than €10/Mwh when first gas production is delivered from the field. $100 million is payable
if that average price exceeds €20/Mwh.
The contingent consideration to be payable in 2024 was estimated at acquisition date to amount to
$61.7 million, which discounted at the selected cost of debt resulted in a present value of $55.2 million
as at the acquisition date.
As at 31 December 2021, the two-year future curve of PSV prices increased from the date of acquisition
and indicate an average price in excess of €20/Mwh. We estimate the fair value of the Contingent
Consideration as at 31 December 2021 to be $78.5 million based on a Monte Carlo simulation (31
December 2020: $55.2 million).
The fair value of the consideration payable has been recognised at level 3 in the fair value hierarchy.
Contingent consideration reconciliation
Contingent consideration
1 January
Unwinding of discount
Mark to Market
31 December
2021
55,174
1,799
21,477
78,450
The fair value of the Contingent Consideration is estimated by reference to the terms of the SPA and the
simulated PSV pricing by reference to the forecasted PSV pricing, historical volatility and a log normal
distribution, discounted at a cost of debt. Noting the natural gas future prices for PSV are currently in
excess of the €20/MWh (the threshold for payment of €100 million), we estimate the fair value of the
Contingent Consideration as at 31 December 2021 to be $78.5 million based on a Monte Carlo
simulation.
Fair values of derivative financial instruments
The Group held financial instruments at fair value at 31 December 2021 related to interest rate and
commodity 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
Page 240 of 273
FINANCIAL STATEMENTS
instruments and commodities involved. Values recorded are as at the balance sheet date, and will not
necessarily be realised.
The Group undertakes hedging activities as part of the ongoing financial risk management to protect
against commodity price volatility and to ensure the availability of cash flow for re-investment in capital
programmes that are driving business delivery. Commodity hedge contracts entered into in Italy aim to
mitigate the risk of changes to the cost of natural gas and that relating to the sale of natural gas.
Hedged Quantity (bbls)
Contract Month Cargo Month
Cargo Size
Fixed Price $
54800
March 2022
March 2022
250 000
77.00
Hedged Quantity (MWs)
Contract Month Cargo Month
Gas Sales Size
Fixed Price €
40,000
85,000
85,000
85,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
December 2021 December 2021
125,634
January 2022
January 2022
204,576
February 2022
February 2022
205,528
March 2022
March 2022
181,954
April 2022
April 2022
May 2022
May 2022
June 2022
June 2022
July 2022
July 2022
226,013
226,806
223,084
222,110
August 2022
August 2022
222,679
September 2022 September 2022 216,103
October 2022
October 2022
215,290
November 2022 November 2022
200,205
December 2022 December 2022
206,640
76.00
75.88
75.88
75.88
75.88
44.06
42.26
40.46
39.13
39.13
40.07
40.07
40.07
As at 31 December 2021, the interest rate derivatives were settled following the repayment of the related
loan. The commodity hedges are Level 2. There were no transfers between fair value levels during
the year.
The fair value hierarchy of financial assets and financial liabilities that are not measured at fair value (but
fair value disclosure is required) is as follows:
Fair value hierarchy as at 31 December 2021
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Financial assets
Trade and other receivables (note 19)
-
284,692
Cash and cash equivalents and bank
deposits (note 16)
730,839
-
-
-
Restricted Cash
Total
Financial liabilities
Financial liabilities held at amortised cost:
199,729
930,568
284,692
-
284,692
730,839
199,729
1,215,260
Trade and other payables – current
-
173,319
-
173,319
Page 241 of 273
FINANCIAL STATEMENTS
Fair value hierarchy as at 31 December 2021
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Borrowings (note 22)
Deferred consideration for acquisition
of minority
Net obligations under finance leases
(note 25)
Convertible loan notes (note 22)
Deferred licence payments (note 25)
Financial liabilities at FVTPL
Interest rate derivatives
Contingent Consideration (note 6)
Total
-
-
-
-
-
-
-
-
2,947,126
167,228
44,425
41,495
57,230
12,546
-
-
-
-
-
-
78,450
2,947,126
167,228
44,425
41,495
57,230
12,546
78,450
3,443,369
78,450
3,521,819
($’000)
Financial assets
Fair value hierarchy as at 31 December 2020
Level 1
Level 2
Level 3
Total
Trade and other receivables (note 17)
-
246,307
Cash and cash equivalents and bank
deposits (note 14)
202,939
-
Total
Financial liabilities
202,939
246,307
Financial liabilities held at amortised cost:
Borrowings (note 20)
Net obligations under finance leases
(note 23)
Deferred licence payments (note 22)
Financial liabilities held at FVTPL:
Interest rate derivatives
Contingent consideration (note 4)
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
55,222
246,307
202,939
449,246
1,443,076
47,623
69,518
6,915
55,222
1,443,076
47,623
69,518
6,915
-
1,567,132
55,222
1,622,354
Page 242 of 273
FINANCIAL STATEMENTS
27.2 Commodity price risk
The Group undertakes hedging activities as part of the ongoing financial risk management to protect
against commodity price volatility and to ensure the availability of cash flow for re-investment in capital
programmes that are driving business delivery. Commodity hedge contracts entered into in Italy aim to
mitigate the risk of changes to the cost of natural gas and that relating to the sale of natural gas.
Hedge position
Gas
2022
2023
Volume hedged (MWs)
Average priced hedged (€/MWs)
705,000
55.89
-
-
At 31 December 2021, our financial hedging programme on gas derivative instruments showed a pre-tax
negative fair value of $12.5 million (2020: nil) included in derivative financial instruments, with no
ineffectiveness charge to the income statement.
There are no hedging contracts entered into with regards to oil price.
27.3 Interest rate risk
The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-
term borrowings are therefore usually at fixed rates. At 31 December 2021, the Group has no exposure
to interest rate risks as all borrowings are at fixed interest rates. The exposure to interest rates for the
Group’s money market funds is considered immaterial.
($'000)
Variable rate instruments
Borrowings
2021
-
2020
1,443,076
1,443,076
27.4 Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount
of future cash inflows from financial assets on hand at the reporting date. The Group has policies in place
to ensure that all of its transactions giving rise to credit risk are made with parties having an appropriate
credit history and monitors on a continuous basis the ageing profile of its receivables.
Also, the Group has policies to limit the amount of credit exposure to any banking institution, considering
among other factors the credit ratings of the banks with which deposits are held. Credit quality
information in relation to those banks is provided below.
With regard to the risk of potential losses caused by the failure of any of the counterparties the Company
interacts with to honour the commitments they have undertaken, the Group has implemented for some
time procedures and tools to evaluate and select counterparties based on their credit rating, constantly
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 2021 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.
Page 243 of 273
FINANCIAL STATEMENTS
Presented below is a breakdown of trade receivables by past due bracket:
($’000)
Trade receivables
Allowance for impairment
Total
31 December 2021 31 December 2020
215,776
(31,834)
183,942
257,779
(31,661)
226,118
Trade receivables
significantly aged.
include balances from EGPC, the Egyptian governmental body that are
($’000)
Not yet due
Past due by less than one month
Past due by one to three months
Past due by three to six months
31 December 2021
31 December 2020
Trade
receivables Allowance
Trade
receivables Allowance
44,602
12,187
12,212
12,959
(1,461)
133,144
(2,127)
(399)
(400)
(425)
16,511
14,269
(424)
(298)
53,055
(1,850)
Past due by more than six months
41,646
(25,786)
40,800
(26,962)
Total
123,606
(28,471)
257,779
(31,661)
Trade Receivables by geography
($’000)
Italy
United Kingdom
Egypt
Greece
Croatia
Israel
Other Countries
Total
31 December 2021 31 December 2020
41,757
5,428
123,850
2,893
212
21,275
2,215
62,622
1,931
184,940
5,617
301
-
2,368
197,630
257,779
Page 244 of 273
FINANCIAL STATEMENTS
Credit quality of bank deposits
The credit quality of the banks in which the Group keeps its deposits is assessed by reference to the
credit rating of these banks. Moody’s credit ratings of the corresponding banks in which the Group keeps
its deposits is as follows:
($'000)
Aa3
A1
A2
A3
BBB
BB
B3
Caa1
Caa2
2021
-
288,953
549,494
10,139
64,760
16,590
634
-
-
2020
51,502
63,244
1
697
73,950
-
12,364
775
406
930,570
202,939
The Company has assessed the recoverability of all cash balances and considers 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:
($’000)
Non-rated
Total
2021
178,804
178,804
2020
226,139
226,139
Page 245 of 273
FINANCIAL STATEMENTS
27.5 Foreign exchange risk
The Group is exposed to foreign exchange risk as it undertakes operations in various foreign currencies.
The key sources of the risk are attributed to the fact that the Group has certain subsidiaries with Euro
functional currencies in which a number of loan agreements denominated in US$ 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.
($’000)
Dollars (US$)
Liabilities
2021
2020
Assets
2021
2020
759,232
130,161
265,166
19,710
United Kingdom Pounds (£)
236,115
358,083
107,336
373,462
Euro
CAD
NOK
ILS
SGD
EGP
Total
588,952
1,072,146
724,116
1,559,366
-
4,403
1,501
276
-
15
259
-
18
32,593
22,442
161
41
238
-
-
50,723
23,103
91
1
1,590,479
1,593,459
1,119,316
2,026,456
Page 246 of 273
FINANCIAL STATEMENTS
The following table reflects the sensitivity analysis for profit and loss results for the year and equity, taking into consideration for the periods presented foreign
exchange variation by +/- 10%.
31 December 2021
USD
Variation
GBP
Euro
ILS
NOK
SGD
EGP
Variation
Variation
Variation
Variation
Variation
Variation
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10% 10%
-10%
Profit or loss (before tax)
(24,122) 29,629
(10,249) 12,275 5,324
(6,755)
Other comprehensive income
-
-
-
-
-
-
Equity
(24,122) 29,629
(10,249) 12,275 5,324
(6,755)
-
-
-
-
2,094
(1,904)
(439) 399
(4)
5
-
-
-
-
2,094
(1,904)
(439) 399
(4)
5
31 December 2020
USD
Variation
GBP
Euro
ILS
NOK
SGD
EGP
Variation
Variation
Variation
Variation
Variation
Variation
Profit or loss (before tax)
12,542
(15,329) 1,503
(1,746) 14,191
(17,220) 5,570
(5,063) 4,637
(5,659) 25
(23)
(4)
5
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10%
10%
-10% 10%
-10%
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
The above calculations assume that interest rates remain the same as at the reporting date.
Page 247 of 273
FINANCIAL STATEMENTS
27.6 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 2021, the Group had available c$113 million
(2020: $1,040 million) of undrawn committed borrowing facilities.
The undrawn facilities are in relation to the Greek State-Backed Loan of €100 million which is to be used
specifically for the development of the Prinos Area in Greece, including the Epsilon development.
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The table includes both interest and principal
cash flows.
The Group manages its liquidity risk by ongoing monitoring of its cash flows. Group management
prepares budgets and regular cash flow forecasts and takes appropriate actions to ensure available cash
deposits and credit lines with the banks are available to meet the Group’s liabilities as they fall due.
The table below summarises the maturity profile of the Group financial liabilities based on contractual
undiscounted payments:
31
December
2021
($'000)
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12
months
1-2 years 2-5 years
More than
5 years
Bank loans 2,950,701 3,936,296
64,095
93,004
208,562
1,640,222
1,930,412
44,425
21,953
1,919
4,937
6,216
7,130
1,744
467,986
552,689
139,467
208,120
26,704
137,047
11,350
Lease
liabilities
Trade and
other
payables
Total
3,463,112 4,510,938
205,481
306,061
241,482
1,784,399
1,943,506
31
December
2020
($'000)
Carrying
amounts
Contractual
cash flows
3 months
or less
3-12
months
1-2 years 2-5 years
More than
5 years
Bank loans 1,443,076 1,652,004
13,541
1,226,014 98,718
273,231
40,500
47,623
48,199
3,539
7,372
5,978
10,082
21,228
395,980
412,544
218,910
63,735
26,155
92,394
11,350
Lease
liabilities
Trade and
other
payables
Total
1,866,679 2,112,747
235,990 1,297,121 130,851 375,707
73,078
Page 248 of 273
FINANCIAL STATEMENTS
28 Related parties
28.1 Related party relationships
Balances and transactions between the Company and its subsidiaries, which are related parties, have
been eliminated on consolidation and are not disclosed in this note.
The Directors of Energean 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 until February 2021 held the 30% of Energean Israel ordinary shares not held by the
Group (please refer to note 21).
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 Ltd: During the year ended 31 December 2021 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.
28.2 Related party transactions
Purchases of goods and services
($’000)
Nature of transactions
2021
Other related party "Seven Marine"
Vessel leasing and services
2,000
2020
1,473
Other related party "Prime Marine Energy Inc" Construction of field
10,273
19,950
support vessel
Other related party "Capital Earth Ltd"
Consulting services
35
129
12,308
21,552
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 $33.3 million. The FSV is being constructed to meet the Group’s specifications and
will provide significant in-country capability to support the Karish project, including FPSO re-supply, crew
changes, holdback operations for tanker offloading, emergency subsea intervention, drilling support and
emergency response. The purchase of this multi-purpose vessel will enhance operational efficiencies
and economics when compared to the leasing of multiple different vessels for the various activities.
Page 249 of 273
28.3 Related party balances
Payables
($’000)
Seven Marine
FINANCIAL STATEMENTS
Nature of balance
2021
2020
Vessel leasing and services
417
417
407
407
28.4 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 2021 ($’000) Salary and fees Benefits
Annual bonus
Total
Executive Directors
1,650
Non-Executive Directors
703
Total
2,353
100
-
100
1,664
-
1,664
3,414
703
4,117
31 December 2020 ($’000) Salary and fees Benefits
Annual bonus
Total
Executive Directors
1,436
Non-Executive Directors
574
Total
2,010
160
-
160
1,215
-
1,215
2,811
574
3,385
29 Commitments and contingencies
In acquiring its oil and gas interests, the Group has pledged that various work programmes will be
undertaken on each permit/interest. The exploration commitments in the following table are an estimate
of the net cost to the Group of performing these work programmes:
($’000)
Capital Commitments149
Due within one year
Due later than one year but within two years
Due later than two years but within five years
Performance guarantees150
Greece
Israel
UK
Italy
Montenegro
2021
2020
20,575
51,180
1,497
73,252
1,176
89,683
99,570
21,292
566
102,255
84,855
200,895
388,005
6,743
62,101
96,655
15,361
614
212,287
181,474
149 Amount of $7.7 million is towards to Government and amount of $65.6 million refers to capital commitments to partners based
on future work programmes.
150 Performance guarantees are
financial obligations.
in respect of abandonment obligations, committed work programmes and certain
Page 250 of 273
FINANCIAL STATEMENTS
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 $10 million for each lease (total $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 guarantees in the
amount of $6 million for all 5 blocks mentioned above. The bank guarantees are in force until 13 January
2023. In addition, $5 million bank guarantee related Block 12 drilling was issued in November 2021 and
is in force until 17 December 2022
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 $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 116 million ILS (approx. $54 million) in order to secure
the first milestone payment from INGL. The first bank guarantee at the amount of 92 million ILS (approx.
$30 million) in force until 21 November 2022. During June 2021 and November 2021 additional two bank
guarantees were issued to secure INGL’s additional milestone payments in total of 18 million ILS (approx.
$6 million) and 56 million ILS (approx. $18 million), accordingly, these bank guarantees are in force until
30 June 2022 and 30 November 2022, respectively.
Israel Other - As part of the ongoing operations in Israel, the Group provided various bank guarantees to
third parties in Israel which amounted approx. $2 million. The main bank guarantees are in force till end
of first quarter of 2022, the remaining bank guarantees are in force till end of third quarter of 2022.
United Kingdom: Following Edison E&P acquisition the Group issued letters of credit amount $99.6 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 $21.3 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 2021.
30
Subsequent events
On the 14 March 2022 - Energean signed a supply agreement with the Israel Electric Company, the largest
Israeli buyer of natural gas. IEC will now have the right to purchase natural gas from Energean’s fields.
The gas price will be determined in each period, with purchased amounts determined on a daily basis.
Starting upon the commencement of first gas production from Karish, the agreement will be valid for an
initial one-year period with an option to extend subject to ratification by both parties.
Page 251 of 273
31
Subsidiary undertakings
At 31 December 2021, the Group had investments in the following subsidiaries:
Name of subsidiary
Country of incorporation / registered office
Principal activities
Energean E&P Holdings Ltd
22 Lefkonos Street, 2064 Nicosia, Cyprus
Holding Company
Energean Capital Ltd
22 Lefkonos Street, 2064 Nicosia, Cyprus
Holding Company
Energean MED Limited
44 Baker Street, London W1U 7AL, United Kingdom Oil and gas exploration,
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
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
Energean Israel Finance SARL
560A rue de Neudorf, L-2220, Luxembourg
Financing activities
Energean Israel Transmission LTD Andre Sakharov 9, Haifa, Israel
Gas transportation license
holder
Energean Isreal Finance LTD
Andre Sakharov 9, Haifa, Israel
Financing activities
Energean Egypt Limited
22 Lefkonos Street, 2064 Nicosia, Cyprus
Oil and gas exploration,
development and
production
FINANCIAL STATEMENTS
Shareholding
At 31 December
2021 (%)
Shareholding
At 31 December
2020 (%)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
70
100
70
70
70
100
Page 252 of 273
Name of subsidiary
Country of incorporation / registered office
Principal activities
FINANCIAL STATEMENTS
Shareholding
At 31 December
2021 (%)
Shareholding
At 31 December
2020 (%)
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)
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
100
100
100
100
Energean Exploration Limited
44 Baker Street, London W1U 7AL, United Kingdom Oil and gas exploration,
100
development and
production
Edison E&P UK Ltd
44 Baker Street, London W1U 7AL, United Kingdom Oil and gas exploration,
100
Edison Egypt Energy Services JSC Cairo, Egypt
development and
production
Oil and gas exploration,
development and
production
100
100
100
100
100
100
100
100
Page 253 of 273
32
Exploration, development and production interests
FINANCIAL STATEMENTS
Fiscal
Regime
Group’s
working
interest
Field Phase
Joint
Operation
Operator
Concession 100%
Development No
Concession 100%
Development No
Concession 100%
Exploration
No
NA
NA
NA
Concession 80%
Exploration
Yes
Energean
Country Fields
Israel
Karish
Tanin
Blocks 12, 21,
22, 23, 31
Four licenses
Zone D
Abu Qir
Abu Qir North
Abu Qir West
Yazzi
Python
Field A (NI-1X)
Field B (NI-3X)
NI-2X
PSC
PSC
PSC
PSC
PSC
PSC
PSC
PSC
Egypt
Greece
Italy
100%
Production
100%
Production
100%
Production
No
No
No
100%
Development No
100%
Development No
100%
Exploration
100%
Exploration
100%
Exploration
No
No
No
Yes
No
NA
NA
NA
NA
NA
NA
NA
NA
ENI
NA
NA
NA
NA
NA
NA
North East Hap'y PSC
30%
Exploration
Viper (NI-4X)
PSC
100%
Exploration
Prinos
Epsilon
Concession 100%
Production
No
Concession 100%
Development No
Prinos
exploration area
Concession 100%
Exploration
No
South Kavala
Concession 100%
Production
No
Katakolo
Ioannina
Concession 100%
Undeveloped No
Concession 40%
Exploration
West Patraikos
Concession 50%
Exploration
Block-2
Concession 75%
Exploration
Vega A
Vega B
Concession 100%
Production
Concession 100%
Production
Rospo Mare
Concession 100%
Production
Yes
Yes
Yes
Yes
Yes
Yes
Repsol
HELPE
Energean
Energean
Energean
Energean
Verdicchio
Concession 100%
Production
No
NA
Vongola Mare
Concession 95%
Production
Yes
Energean
Page 254 of 273
FINANCIAL STATEMENTS
Country Fields
Fiscal
Regime
Group’s
working
interest
Field Phase
Joint
Operation
Gianna
Accettura
Anemone
Appia
Concession 49%
Development Yes
Concession 50%
Production
Concession 19%
Production
Concession 50%
Production
Yes
Yes
Yes
Argo-Cassiopea
Concession 40%
Development Yes
Azalea
Calipso
Concession 16%
Production
Concession 49%
Production
Candela Dolce
Concession 40%
Production
Candela Povero
Concession 40%
Production
Carlo
Concession 49%
Production
Cassiano
Concession 50%
Production
Castellaro
Concession 50%
Production
Cecilia
Concession 49%
Production
Clara East
Concession 49%
Production
Clara North
Concession 49%
Production
Clara Northwest Concession 49%
Production
Clara West
Concession 49%
Production
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Comiso
Cozza
Daria
Didone
Concession 100%
Production
No
Concession 85%
Production
Concession 49%
Production
Concession 49%
Production
Emma West
Concession 49%
Production
Fauzia
Concession 40%
Production
Giovanna
Concession 49%
Production
Leoni
Concession 50%
Production
Monte Urano-
San Lorenzo
Concession 40%
Production
Naide
Concession 49%
Production
Portocannone
Concession 62%
Production
Quarto
Concession 33%
Production
Ramona
Regina
Salacaro
San Giorgio
Mare
Concession 49%
Production
Concession 25%
Production
Concession 50%
Production
Concession 95%
Production
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Operator
ENI
Energean
ENI
Energean
ENI
ENI
ENI
ENI
ENI
ENI
Energean
Energean
ENI
ENI
ENI
ENI
ENI
NA
Energean
ENI
ENI
ENI
ENI
ENI
Gas Plus
Energean
ENI
Energean
Padana
Energia
ENI
ENI
Energean
Energean
Page 255 of 273
FINANCIAL STATEMENTS
Country Fields
Fiscal
Regime
Group’s
working
interest
Field Phase
Joint
Operation
San Marco
Concession 100%
Production
No
Operator
NA
Santa Maria
Mare
Concession 96%
Production
Yes
Energean
UK
Santo Stefano
Concession 95%
Production
Sarago Mare
Concession 85%
Production
Sinarca
Concession 40%
Production
Talamonti
Concession 50%
Production
Tresauro
Concession 25%
Production
Yes
Yes
Yes
Yes
Yes
Garrow
Concession 68%
Production
Yes
Kilmar
Concession 68%
Production
Yes
Scott
Telford
Concession 10%
Production
Concession 16%
Production
Wenlock
Concession 80%
Production
Glengorm
Concession 25%
Exploration
Isabella
Concession 10%
Exploration
Yes
Yes
Yes
Yes
Yes
Montenegro
Block 26, 30
Concession 100%
Exploration
No
Croatia
Malta
Irena
Izabela
PSC
PSC
70%
70%
Exploration
Production
No
No
Blocks 1, 2 and 3
of Area 3
Concession 100%
Exploration
No
Energean
Energean
Gas Plus
Energean
Enimed
Alpha
Petroleum
Alpha
Petroleum
CNOOC
CNOOC
Alpha
Petroleum
CNOOC
Total
Energies
E&P North
Sea UK
Limited
NA
NA
NA
NA
Page 256 of 273
Company Statement of Financial Position
FINANCIAL STATEMENTS
As at 31 December 2021
($’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
Borrowings
Total liabilities
Capital and reserves
Share capital
Share premium
Other reserves
Share based payment reserve
Retained earnings
Total equity
Total equity and liabilities
Notes
2021
2020
3
5
6
8
9
10
10
12
1,154,387
59
336,150
1,031,991
71
2,183
1,490,596
1,034,245
131,677
18,910
150,587
25,745
67,187
92,932
1,641,183
1,127,177
12,105
12,105
551
483,441
483,992
496,097
2,374
915,388
10,459
19,374
197,491
1,145,086
1,641,183
10,532
10,532
153
-
153
10,685
2,367
915,388
-
13,419
185,318
1,116,492
1,127,177
During the year the Company made a profit of $12.2 million (31 December 2020: loss of $1.7 million).
Approved by the Board and authorised for isssuance on 23 March 2022.
Matthaios Rigas
Chief Executive Officer
Panagiotis Benos
Chief Financial Officer
Page 257 of 273
FINANCIAL STATEMENTS
Company Statement of Changes in Equity
For the year ended 31 December 2021
($’000)
Share
Capital
Share
Premium
Share
based
payment
reserve
Equity
component of
convertible
bonds
At 1 January 2020
2,367
915,388
10,094
Profit/(loss) for the year
-
Transactions with owners
of the company
Employee share schemes
-
-
-
-
3,325
At 31 December 2020
2,367
915,388
13,419
Profit/(loss) for the year
-
-
-
-
-
-
-
Retained
earnings
Total
equity
186,993 1,114,842
(1,675)
(1,675)
-
3,325
185,318 1,116,492
12,173
12,173
Transactions with owners
of the company
Share based
payment charges
Exercise of Employee
Share options
7
Convertible bond issue
(note 9)
5,962
(7)
10,459
5,962
-
10,459
At 31 December 2021
2,374
915,388
19,374
10,459
197,491
1,145,086
Page 258 of 273
FINANCIAL STATEMENTS
Company Accounting Policies
For the year ended 31 December 2021
1
General information
Energean plc (‘the Company') was incorporated in England & Wales on 8 May 2017 as a public company
with limited liability, under the Companies Act 2006. Its registered office is at 44 Baker Street, London
W1U 7AL, United Kingdom. The Financial Statements are presented in US dollars and all values are
rounded to the nearest US$ thousands ($‘000), except where otherwise stated. Energean plc is the
ultimate Parent of the Energean Group.
2
Basis of preparation
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS
100) issued by the Financial Reporting Council. The parent company Financial Statements have therefore
been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 (FRS
101) “Reduced Disclosure Framework” as issued by the Financial Reporting Council. As permitted by FRS
101, the Company has taken advantage of the following disclosure exemptions under FRS 101:
• The requirements of IFRS 7 Financial Instruments: Disclosures;
• The requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
• 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;
• The requirements of paragraphs 10(d), 16, 38A to 38D, 111 and 134 to 136 of IAS 1 Presentation of
Financial Statements;
• The requirements of IAS 7 Statement of Cash Flows;
• The requirements of paragraphs 45(b) and 46-52 of IFRS 2 share-based payments
• The requirements of paragraph 17 of IAS 24 Related Party Disclosures;
• 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
• The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
Where relevant, equivalent disclosures have been given in the Group 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 performed an assessment and concluded that the preparation of the financial
statements on a going concern basis is appropriate. In making this assessment a number of factors were
considered, refer to note 2.1. of the 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
Page 259 of 273
FINANCIAL STATEMENTS
2.2 Foreign currencies
The US dollar is the functional currency of the Company. Transactions in foreign currencies are translated
at the rates of exchange ruling at the transaction date. Monetary assets and liabilities denominated in
foreign currencies are translated into US dollars at the rates of exchange ruling at the balance sheet date,
with a corresponding charge or credit to the income statement.
2.3
Investments
Fixed asset investments, representing investments in subsidiaries, are stated at cost and reviewed
for impairment
if there are indications that the carrying value may not be recoverable.
2.4 Trade and other receivables
Receivables represent the 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). The Company is required to
assess the carrying values of each of the amounts due from subsidiary undertakings, considering the
requirements established by IFRS 9 Financial Instruments. The IFRS 9 impairment model requires the
recognition of ‘expected credit losses’. If the subsidiary has sufficient liquid assets to repay the loan if
demanded at the reporting date, the expected credit loss is likely to be immaterial. However, if the
subsidiary could not demonstrate the ability to repay the loan, if demanded at the reporting date, the
Company calculated an expected credit loss.
2.5 Trade and other payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and services
provided to the Company prior to the end of the financial year that are unpaid and arise when the
Company becomes obligated to make future payments in respect of the purchase of those goods
and services.
2.6 Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised, modified and through the EIR amortisation process. Amortised cost is calculated by taking
into account any discount or premium on acquisition and fees or costs that are an integral part of the
EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
2.7 Convertible bonds
Convertible bonds are separated into liability and equity components based on the terms of the contract.
The fair value of the liability component on initial recognition is calculated by discounting the contractual
cash flows using a market interest rate for an equivalent non-convertible instrument. The difference
between the fair value of the liability component and the proceeds received on issue is recorded as equity.
Transaction costs are apportioned between the liability and the equity components of the instrument
based on the amounts initially recognised. The liability component is classified as a financial liability
measured at amortised cost (net of transaction costs) until it is extinguished on conversion or settlement.
The equity component is not remeasured.
2.8 Share issue expenses
Costs of share issues are written off against share premium arising upon the issuance of share capital.
Page 260 of 273
FINANCIAL STATEMENTS
2.9 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.
2.10 Share-based payments
The Company has share-based awards that are equity settled as defined by IFRS 2. The cost of equity-
settled transactions is determined by the fair value at the date when the grant is made using an
appropriate valuation model. That cost is recognised in employee remuneration expense together with a
corresponding increase in equity (share-based payment reserve), over the period in which the service
and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative
expense recognised for equity-settled transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period
represents the movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant
date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s
best estimate of the number of equity instruments that will ultimately vest. Market performance
conditions are reflected within the grant date fair value. Any other conditions attached to an award, but
without an associated service requirement, are considered to be non-vesting conditions. Non-vesting
conditions are reflected in the fair value of an award and lead to an immediate expensing of an award
unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance
and/or service conditions have not been met. Where awards include a market or non-vesting condition,
the transactions are treated as vested irrespective of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant
date fair value of the unmodified award, provided the original vesting terms of the award are met. An
additional expense, measured as at the date of modification, is recognised for any modification that
increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the
employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of
the fair value of the award is expensed immediately through profit or loss.
2.11 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.
2.12 Critical accounting judgements and key sources of estimation uncertainty
There are no critical accounting judgements and key sources of estimation uncertainty in the
current year.
Page 261 of 273
FINANCIAL STATEMENTS
3
Investments in subsidiaries
The following table shows the movement in the investment in subsidiaries during the year
($’000)
At 31 December 2020
Additions
At 31 December 2021
1,031,991
122,396
1,154,387
During 2021, the Company increased its investments in subsidiary undertakings by $122.4 million (31
December 2020: $154.8 million). These additions relate partly to further injections of cash, for the
issuance of shares, in existing subsidiaries ($72.4 million) and partly due to the transaction with Kerogen
to acquire the minority interest in Energean Israel Limited ($50 million).
A complete list of Energean plc Group companies at 31 December 2021, and the Group’s percentage of
share capital are set out in the note 31 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 2021 (2020: $nil).
5
Loans and other intercompany receivables
($’000)
Loans to subsidiaries
2021
334,073
Receivables from share-based plan to subsidiary undertakings 2,077
At 31 December
336,150
2020
1,638
545
2,183
The loans to subsidiaries consist of three loans, two of which were issued in the current year and the loan
to Energean International Limited (‘EIL’). Loans were issued to Energean Capital Limited (‘ECL’) ($221.2
million) and Energean Oil and Gas S.A. (‘EOGSA’) ($110.9 million) during the year. The ECL loan incurs a
fixed rate of interest at 5.5% per annum and matures on 18 May 2027. The EOGSA loan incurs a fixed
rate of interest at 6.7% and matures on 18 November 2029. The loan to EIL incurs a fixed rate of interest
at 3% per annum and has maturity date on 20 December 2023.
At 31 December 2021 no expected credit loss allowances (2020: $nil) were held in respect of the
recoverability of amounts due from subsidiary undertakings.
Page 262 of 273
6
Trade and other receivables
($’000)
Financial items
Receivables from shareholders
Due from subsidiary undertakings
Non-financial items
Deposits and prepayments
Refundable VAT
FINANCIAL STATEMENTS
2021
2020
-
129,840
129,840
1,069
768
1,837
22
23,417
23,439
1,894
412
2,306
Total trade and other receivables
131,677
25,745
At 31 December 2021 no expected credit loss allowances (2020: $nil) were held in respect of the
recoverability of amounts due from subsidiary undertakings. The increase in the current year relates to
amounts receivable from Energean E&P Holdings that are currently held in time deposits, expiring in 2022
($120 million). $80 million of the receivable incurs interest at a fixed rate of 0.82% per annum and the
remaining $40 million at a fixed interest rate of 0.73% per annum.
The amounts due from subsidiary undertakings include the current portion of the loans issued to
Energean Capital Limited, Energean Oil and Gas S.A. and Energean International which incur a fixed rate
of interest as set out above in note 5 of the financial statements. The remaining amounts due from
subsidiaries accrue no interest and relate to intragroup recharges for subsidiaries’ employees share-
based payments and management services provided by the Company to its subsidiaries under a “Master
Intercompany Services Agreement”.
7
Financial risk management objectives
The Company follows the Group’s policies for managing all its financial risks. Refer to note 27 in the
Group Financial Statements.
8
Trade and other payables
($’000)
Staff costs accrued
Trade payables
Due to subsidiary undertakings
Finance costs accrued
Accrued expenses
Taxes and social security costs payable
Other creditors
2021
2,291
2,790
1,097
3,575
2,040
261
51
2020
1,922
939
385
-
7,031
250
5
Total trade and other payables
12,105
10,532
The amounts are unsecured and are usually paid within 30 days of recognition.
Page 263 of 273
FINANCIAL STATEMENTS
9
Borrowings
On 25 February 2021, the Group completed the acquisition of the remaining 30% minority interest in
Energean Israel Limited from Kerogen Investments No.38 Limited, Energean now owns 100% of
Energean Israel Limited. The transaction resulted in $50 million of convertible loan notes (the “Convertible
Loan Notes”) being issued, which have a maturity date of 29 December 2023, a strike price of £9.50 and
a zero-coupon rate. For further details on the transaction refer to note 21 in the consolidated financial
statements.
On 18 November 2021, the Company completed the issuance of $450 million aggregate principal amount
of senior secured notes maturing in 2027 at a fixed interest rate of 6.5%. For further details on the
transaction refer to note 22 in the consolidated financial statements.
($'000)
Non-current
Convertible loan notes
6.5% Senior Secured notes
Carrying value of non-current borrowings
10
Share capital
2021
2020
41,496
441,945
483,441
-
-
Equity share capital
allotted and fully paid
Share capital ($’000) Share premium ($’000)
Authorised
At 31 December 2019
177,089,406
At 31 December 2020
177,089,406
Issued during the year
- Employee share schemes 513,154
At 31 December 2021
177,602,560
2,367
2,367
7
2,374
915,388
915,388
-
915,388
As at 31 December 2021, the Company’s issued share capital consisted of 177,602,560 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.
11
Staff costs
($'000)
Wages and salaries
Directors' remuneration
Social insurance costs and other funds
Share-based payments
Pension contribution & insurance
Total Staff Cost
2021
2,117
3,136
1,913
3,933
458
11,557
2020
2,770
2,032
974
2,362
67
8,205
Page 264 of 273
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 2021 was
1.3 years (31 December 2020: 1.4 years), number of shares outstanding 2,036,982 and weighted average
price at grant date £5.99.
There are further details of the LTIP in the Remuneration Committee Report section of the Annual Report
and note 26 in the consolidated financial statements.
Deferred Share Bonus Plan (DSBP)
Under the DSBP, the portion of any annual bonus above 30% of the base salary of a Senior Executive
nominated by the Remuneration Committee is deferred into shares.
Deferred awards are usually granted in the form of conditional share awards or nil-cost options (or,
exceptionally, as cash-settled equivalents). Deferred awards usually vest two years after award although
may vest early on leaving employment or on a change of control.
The weighted average remaining contractual life for DSBP awards outstanding at 31 December 2021 was
0.8 years (31 December 2020: 0.8 years), number of shares outstanding 234,902 and weighted average
price at grant date £6.75.
There are further details refer to note 26 in the consolidated financial statements.
13
Related party transactions
The Company’s subsidiaries at 31 December 2021 and the Group’s percentage of share capital are set
out are in note 31 of the consolidated financial statements. The following table provides the Company’s
balances which are outstanding with subsidiary companies at the balance sheet date:
($'000)
Loans to subsidiaries
2021
334,073
Receivables from share-based plan to subsidiary undertakings
2,077
Trade and other receivables
Total amounts receivable from subsidiary undertakings
Amounts payable to subsidiary undertakings
129,840
465,990
1,097
2020
1,638
545
23,417
25,600
385
464,893
25,215
The amounts outstanding are unsecured and will be settled in cash.
Page 265 of 273
FINANCIAL STATEMENTS
The following table provides the Company’s transactions only with partially owned subsidiary companies
(minority interest exists) recorded in the income statement:
($'000)
Amounts invoiced to partially owned subsidiaries under a
“Master Intercompany Services Agreement”151
Transaction with other related party ($’000)
Consulting services by Capital Earth Limited
2021
786
786
2021
35
35
2020
5,354
5,354
2020
129
129
Capital Earth Limited is a consulting company controlled by the spouse of one of Energean’s executive
directors. Refer to note 28 in the consolidated financial statements for further details.
14 Directors’ remuneration
Directors’ remuneration has been provided in the remuneration report within the Annual Report. Please
refer to pages 133-159 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 30 of the consolidated financial statements.
151 The amounts invoiced in 2021 relate to the period prior to 25 February 2021, before Energean Israel became a wholly owned
subsidiary. As at 31 December 2021 there are no partially owned subsidiaries.
Page 266 of 273
OTHER INFORMATION
Other Information
2021 Report on Payments to Governments
Basis of preparation
This Report provides a consolidated overview of the payments to governments made by Energean plc
and its subsidiary undertakings (“Energean”) for the full year 2021 as required under the Report on
Payments to Governments Regulations 2014 (2014/3209), as amended in December 2015 (2015/1928),
(the
the Financial Conduct Authority's Disclosure and
Transparency Rules.
“Regulations”) and DTR 4.3A of
This Report is available for download from www.energean.com.
Activities
Payments made to governments that relate to Energean’s activities involving the exploration,
development, and production of oil and gas reserves (“Extractive Activities”) are included in this
disclosure. Payments made to governments that relate to activities other than Extractive Activities are
not included in this report as they are not within the scope of the Regulations.
Government
Under the Regulations, a government is defined as any national, regional or local authority of a country
and includes a department, agency or undertaking that is a subsidiary undertaking controlled by such an
authority. All of the payments included in this disclosure have been made to national governments, either
directly or through a ministry or department of the national government, with the exception of Greek
payments in respect of production royalties and licence fees, which are paid to Hellenic Hydrocarbon
Resources Management SA.
Project
Payments are reported at project level with the exception that payments that are not attributable to a
specific project are reported at the entity level. A “Project” is defined as operational activities which are
governed by a single contract, licence, lease, concession or similar legal agreement, and form the basis
for payment liabilities with a government. If such agreements are substantially interconnected, those
agreements are to be treated as a single project.
“Substantially interconnected” means forming a set of operationally and geographically integrated
contracts, licences, leases or concessions or related agreements with substantially similar terms that are
signed with a government giving rise to payment liabilities. Such agreements can be governed by a single
contract, joint venture, production sharing agreement, or other overarching legal agreement. Indicators
of integration include, but are not limited to, geographic proximity, the use of shared infrastructure and
common operational management.
Payments
The information is reported under the following payment types.
Production entitlements
Under production-sharing agreements (“PSAs”), production is shared between the host government and
the other parties to the PSA. The host government typically receives its share or entitlement in kind rather
than being paid in cash.
Taxes
Taxes are paid by Energean on its income, profits or production and are reported net of refunds.
Consumption taxes, personal income taxes, sales taxes, property and environmental taxes are excluded.
Page 267 of 273
OTHER INFORMATION
Royalties
Royalties are payments for the rights to extract oil and gas resources, typically at a set percentage of
revenue less any allowable deductions.
Dividends
Dividends, in this context, are dividend payments other than those paid to a government as an ordinary
shareholder of an entity, unless paid in lieu of production entitlements or royalties. For the year ended
December 31, 2021, there were no reportable dividend payments to a government.
Bonuses
Bonuses are usually paid upon signature of an agreement or a contract, declaration of a commercial
discovery, commencement of production or achievement of a specified milestone.
Fees
Fees and other sums are paid as consideration for the acquisition of a licence that enables access to an
area for the purposes of performing Extractive Activities. Administrative government fees that are not
specifically related to Extractive Activities, or to access extractive resources, are excluded, as are
payments made in return for services provided by a government.
Infrastructure improvements
Infrastructure improvements payments relate to the construction of infrastructure (road, bridge or rail)
that are not substantially dedicated for the use of extractive activities. Payments that are of a social
investment in nature, for example building of a school or hospital, are also excluded. For the year ended
December 31, 2021, there were no reportable payments for infrastructure improvements.
Cash basis
Payments are reported on a cash basis, meaning that they are reported in the period in which they are
paid, as opposed to being reported on an accruals basis (which would mean that they were reported in
the period for which the liabilities arise).
Materiality level
For each payment type, total payments below $118,329 to a government are excluded from this report.
Exchange rate
All payments have been reported in US dollars. Payments made in currencies other than US dollars are
typically translated at the average exchange rate of the year under consideration.
Page 268 of 273
OTHER INFORMATION
Payments overview
The table below shows the relevant payments to governments made by Energean in the year ended 31
December 2021 shown by country and payment type.
Of the seven payment types that the UK regulations require disclosure of, Energean did not make any
payments in respect of production entitlements, dividends or infrastructure improvements, therefore,
those categories are not shown in the tables.
Country ($m)
Income taxes
Royalties
Bonuses
Fees
Egypt
Israel
Italy
United Kingdom
Total
Payments by project
33.60152
-
-
(0.79)
32.81
-
-
19.13
-
0.70
-
-
-
19.13
0.70
0.12
0.42
3.37
1.22
5.13
Payments by Project ($m)
Income taxes
Royalties Bonuses
Fees
Egypt - Abu Qir
33.60
Egypt - North El Amriya /
North Idku
Egypt - Exploration
-
-
Egyptian Government Report
33.60
Israel - Karish/Tanin leases
Israel - Exploration assets
Israeli Government Report
Italy - A.C 13.AS
Italy - A.C 14.AS
Italy - A.C 16.AG
Italy - A.C Other
Italy - B.C 10.AS
Italy - B.C 13.AS
Italy - B.C 14.AS
Italy - B.C 9.AS
Italy - B.C1.LF
Italy - B.C2.LF
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.35
9.54
4.05
-
-
-
0.50
-
0.20
0.70
-
-
-
-
-
-
-
-
-
-
-
-
-
0.10
0.02
-
0.12
0.18
0.24
0.42
0.06
0.08
0.32
0.14
0.15
0.33
0.13
0.03
0.09
0.07
Total
34.42
0.42
22.50
0.43
57.77
Total
34.20
0.02
0.20
34.42
0.18
0.24
0.42
0.06
0.08
0.32
0.14
1.50
9.87
4.18
0.03
0.09
0.07
152 Our Egyptian assets are operated under PSAs, which set out the terms of the activities, including the applicable tax laws and
regulations. Under the Abu Qir PSA, Energean is entitled to the net production from the asset, which forms the basis for the
calculation and reporting of its payments to the Egyptian Government. Taxes include in-kind volumes due by Energean to the
Egyptian Tax Authorities under the PSAs, which provide that the tax obligations of the company are settled by the Egyptian
General Petroleum Corporation (EGPC) out of its share of profit oil. The monetary value of those payments is determined using
the same method as per production entitlements. The corporate income taxes paid in 2021, were settled by EGPC on
Energean’s behalf out of production entitlement (payment in kind), in accordance with the terms of our PSAs. The terms of our
PSAs provide that corporate income taxes are paid in the year following that to which they relate. Accordingly, 2021 payment
relates to 2020 taxable profits.
Page 269 of 273
Italy - B.C7.LF
Italy - B.C8.LF
Italy - B.C Other
Italy - C.C6.EO
Italy - Candela
Italy - Colle Di Lauro
Italy - Comiso II
Italy - Garaguso
Italy - Montignano
Italy - S.Anna (Tresauro)
Italy - Other
Italian Government
UK - Tors & Wenlock assets
UK – Scott & Telford assets
UK - Appraisal assets
UK – Markham
UK – Corporate
UK Government
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.79)
(0.79)
0.81
1.19
-
0.97
-
0.27
0.12
0.49
-
0.34
-
19.13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
OTHER INFORMATION
0.19
0.34
0.20
0.22
0.26
0.04
0.01
0.07
0.06
0.01
0.57
3.37
0.93
0.03
0.21
0.05
-
1.22
1.00
1.53
0.20
1.19
0.26
0.31
0.13
0.56
0.06
0.35
0.57
22.50
0.93
0.03
0.21
0.05
(0.79)
0.43
Total
32.81
19.13
0.70
5.13
57.77
Page 270 of 273
OTHER INFORMATION
Glossary
CO2 - Carbon dioxide
SO2 - Sulphur dioxide
NOx - Nitrogen oxides
GBP or £ - Pound sterling
USD or $ - US dollar
EUR or €- Euro
A
ACQ - Annual Contract Quantity AGM - Annual General Meeting B
bbl - Barrel
Bcf - Billion cubic feet bcm - Billion cubic metres
boe - Barrels of oil equivalent
boe/d - Barrels of oil equivalent per day bopd - Barrels of oil per day
C
Capex - Capital expenditure CEO - Chief Executive Officer CFO - Chief Financial Officer COO - Chief
Operating Officer
CMAPP - Corporate Major Accident Prevention Policy CNG - Compressed natural gas
CPR - Competent Person’s Report
CSR - Corporate Social Responsibility
E
E&P - Exploration and production
EBITDAX - Earnings before interest, tax, depreciation, amortisation and exploration expenses EBRD -
European Bank for Reconstruction and Development
EOR - Enhanced Oil Recovery
EPCIC - Engineering, Procurement, Construction, Installation and Commissioning
F
FAR - Fatal Accident Rate - number of fatalities per 100 million hours worked FDP - Field Development
Plan
FEED - Front-end Engineering and Design FID - Final Investment Decision
FPSO - Floating Production Storage and Offloading vessel FRC - Financial Reporting Council
FRS - Financial Reporting Standard
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
Page 271 of 273
OTHER INFORMATION
I
IAS - International Accounting Standard
IASB - International Accounting Standards Board IFRS - International Financial Reporting Standard INGL
- Israel Natural Gas Lines Ltd
IPO - Initial Public Offering
IPP - Independent Power Producers IR - Investor Relations
J
JOA - Joint Operating Agreement JV - Joint Venture
K
kboepd - Thousands of barrels of oil equivalent per day km - Kilometres
KPI - Key Performance Indicator
L
LIBOR - London Interbank Offered Rate LSE - London Stock Exchange
LTI - Lost Time Injury
LTIF - Lost Time Injury Frequency
M
M3 - Cubic metre MN - Million
MMbbls - Million barrels MMbo - Million barrels of oil
MMboe - Million barrels of oil equivalents MMbtu - Million British Thermal Units MMscf - Million standard
cubic feet
MMscf/day or MMscfd - Million standard cubic feet per day MMtoe - Million tonnes of oil equivalent
MoU - Memorandum of Understanding
N
NGO - Non-Governmental Organisation NPV - Net Present Value
NSAI - Netherland, Sewell & Associates, Inc. O Opex - Operating expenses
P
PP&E - Property, plant and equipment
R
2P reserves - Proven and probable reserves RBL - Reserve Based Lending
2C resources - Contingent resources
S
Sq km or km2 - Square kilometres
T
Tcf - Trillion cubic feet
TRIR - Total Recordable Injury Rate TASE - Tel Aviv Stock Exchange
W
WI - Working interest
Page 272 of 273
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
Registrar
Computershare Investor Services plc
The Pavilions Bridgwater Road
Bristol
BS13 8AE
Financial calendar
May 2022: Annual General Meeting
Page 273 of 273