Share Name Share Symbol Market Type Share ISIN Share Description
Energean Oil & Gas Plc LSE:ENOG London Ordinary Share GB00BG12Y042 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  6.00 0.67% 896.00 892.00 896.00 899.00 891.00 896.00 72,606 16:35:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Oil & Gas Producers 70.8 66.9 62.7 14.4 1,584

Energean Oil & Gas PLC Results For Half Year Ended 30 June 2019

12/09/2019 7:01am

UK Regulatory (RNS & others)


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Energean Oil & Gas PLC

12 September 2019

Energean Oil & Gas plc

("Energean" or the "Company")

Results For Half Year Ended 30 June 2019

London, 12 September 2019 - Energean Oil and Gas plc (LSE: ENOG), the independent gas and oil exploration and production company focused on the Mediterranean, announces its half-year results for the half year ended 30 June 2019 ("1H 2019").

Mathios Rigas, Chief Executive, Energean Oil & Gas commented:

"We are on track and on budget to deliver first gas from the Karish Tanin development in Q1 2021 having delivered key milestones in the project, discovered more gas to monetise through the successful Karish North well as well as making good progress elsewhere across the portfolio. The Edison transaction announced in July is on track to complete before the end of this year, at which point Energean will become a company of considerable scale in the Mediterranean with pro-forma 2P reserves of 639 mmboe, weighted 80% towards gas, further enhancing our energy transition strategy. With the addition of the Edison portfolio, Energean now has a significant number of new investment opportunities and, as part of the integration process, we are reviewing all capital allocation options to ensure that investment is prioritised towards those projects which offer the highest returns. We look forward to a busy second half to what has so far been a very successful and transformational year at Energean."

Highlights

-- Acquired Edison E&P for $750 million of up-front consideration, representing headline metrics of $2.6 /boe and 1.7x 2018 EBITDAX, and adding immediate cash flows, EBITDAX and incremental growth opportunities. Contingent consideration of $100 million is payable following first gas from Cassiopea (expected 2022)[1]

-- Raised $265 million of equity and $600 million of bridge financing to fund the acquisition. Long-term reserve-based lending facility take-out of the bridge financing is ongoing and expected to complete in 4Q1

   --   The acquisition remains on track to complete before 2019 year-end 

-- Upon completion pro-forma 2P reserves will be 639mmboe (c.80% gas) and pro-forma 2022 production will be c. 140,000 boepd (c. 80% gas)

   --   Karish and Tanin development on budget and on track for first gas in Q1 2021 
   --   Significant gas discovery at Karish North with a higher-than-expected liquids content 

-- Completed the drilling of two of the three Karish development wells, confirming a 45m gas column in the D sands and a higher-than-expected liquids content in the main C sand reservoir

-- 4. 7 bcma of gas sales contracted, leaving 3.3 bcma FPSO capacity for future discoveries. Term sheet agreed with Mrc Alon Tavor Power Ltd., the winning bidder of the Alon Tavor tender

-- Initiated a capital allocation review across the enlarged portfolio, in order to prioritise investment towards those projects that deliver the highest stakeholder returns

   --   Awarded four new, highly prospective licences in the Israeli EEZ 

-- Completed drilling of the second Epsilon vertical well, which indicated increased oil in place and reinforced Epsilon as the driver of production growth in Greece

   --   At 30 June 2019, Energean had cash and undrawn debt facilities of $1.01 billion[2] 
 
                                1H 2019   1H 2018      Change 
                                     $m        $m 
=============================  ========  ========  ========== 
 Sales revenue                     40.0      26.3       52.1% 
-----------------------------  --------  --------  ---------- 
 Operating profit                   3.9      10.2     (62.2%) 
-----------------------------  --------  --------  ---------- 
 Profit / (loss) before tax       (3.1)      82.1    (103.8%) 
-----------------------------  --------  --------  ---------- 
 Adjusted EBITDAX[3]               23.6      16.7       41.1% 
-----------------------------  --------  --------  ---------- 
 Operating cash flow[4]            23.7      16.9       39.9% 
-----------------------------  --------  --------  ---------- 
 Capital expenditure              346.9     105.5      228.9% 
-----------------------------  --------  --------  ---------- 
 Cash capital expenditure[5]      541.4     136.4      296.9% 
-----------------------------  --------  --------  ---------- 
 Net debt / (cash)                390.4   (166.5)    (334.4%) 
=============================  ========  ========  ========== 
 

4Q19 Outlook

   --   Completion of the acquisition of Edison E&P 

-- Sailaway of the Energean Power FPSO hull from China to Singapore for integration of the topsides

   --   Completion of the Karish Main development drilling programme 

-- Appraisal of Karish North with the intention of narrowing the resource range and further defining the liquids content

-- NSAI CPRs to define the upside volumes associated with the Epsilon Deep and Dolomitic Zones and Katakolo development project

-- 2019 Full Year production guidance of 3,400 - 3,600 bopd (previously 4,300 - 4,800 bopd). Early conclusions from the capital allocation review resulted in the smart stacking of the Energean Force, halting Prinos infill drilling and focusing near-term investment on interventions, workovers and the high-return Epsilon accumulation

-- 2019 development and production capital expenditure guidance reduced by $40 million, driven by the revised investment programme in Greece

Enquiries

 
 Energean                     Tel: 07917 608645 
 Kate Sloan, Head of IR 
 Camarco (Financial PR)       Tel: 020 3757 4980 
 Billy Clegg / Owen Roberts 
 

A conference call for analysts and investors will be held at 08:00am GMT today. Conference call details are provided below. The presentation slides are available on the website www.energean.com.

Dial in numbers:

Israel Toll-Free: 1809213407

Israel Toll: +972 37207679

United Kingdom Toll-Free: 08003589473

United Kingdom Toll: +44 3333000804

Greece Toll: +30 2112111509

Greece Toll-Free: 0080033153417

URL for other international dial ins: http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

PIN: 78096205#

Audience URL:

http://arkadinemea-events.adobeconnect.com/energeanreg/event/registration.html

Acquisition of Edison E&P

On 4 July 2019, Energean announced that it has entered into a conditional sale and purchase agreement to acquire Edison Exploration & Production S.p.A. ("Edison E&P") from Edison S.p.A. ("Edison") for US$750 million, subject to working capital adjustments, with additional contingent consideration of US$100 million payable following first gas from the Cassiopea development (expected 2022), offshore Italy.

Edison E&P's portfolio of assets includes producing assets in Egypt, Italy, Algeria, the UK North Sea and Croatia, development assets in Egypt, Italy and Norway and balanced-risk exploration opportunities across the portfolio. The Edison E&P portfolio 2P reserves of 292 mmboe and 2018 production of 69 kboe/d. Upon completion pro-forma 2P reserves will be 639mmboe (c. 80% gas) and pro-forma 2022 production will be c. 140,000 boepd (c. 80% gas).

The acquisition of Edison E&P on attractive metrics is in line with Energean's stated strategy of creating the leading independent, gas-focused E&P company in the Mediterranean, playing an important role in the energy transition. It will significantly increase Energean's scale and diversification by adding a complementary portfolio of accretive development, appraisal and exploration opportunities, whilst immediately contributing EBITDAX and cashflow to support the enlarged Group's strategic growth and medium-term ambition to start paying a dividend. With the addition of the Edison portfolio, Energean now has a significant number of new investment opportunities. As part of the integration process, we will be reviewing all of these opportunities, along with those in our existing portfolio, to ensure that capital is allocated to those projects with optimum returns and strategic fit.

The initial consideration will be funded through a $600 million committed bridge loan facility and $265 million of equity placed at 900p per share. The total debt and equity capital has been sized to cover both the initial consideration and working capital requirements of the Enlarged Group.

The $600 million committed bridge loan facility is expected to be replaced in H2 2019 using a combination of a reserve-based lending facility and/or corporate debt. The $100 million of contingent consideration is expected to be funded by the combined free cash flow of the enlarged Group as well as any incremental reserve-based facility and/or corporate debt capacity. Energean is also progressing the potential sale of non-core assets of the enlarged Group.

Energean is progressing with regulatory approval and Edison E&P continues to perform in-line with expectations since announcement of the acquisition. Energean expects the transaction to close in 4Q 2019.

Operational Review

Israel

Energean's Karish and Tanin development project remains on budget and on track to deliver first gas into the Israeli domestic market in 1Q 2021. During the period, Energean met its key milestones of spudding its first wells, including completing the drilling of Karish North, Karish Main-03 and Karish Main-02, and keel laying on the FPSO. The next visible milestones will be completion of the development drilling programme, expected 4Q 2019, Karish North appraisal and sailaway of the FPSO Hull from China to Singapore, expected late 2019.

Israel - Drilling

During the period, Energean completed drilling operations at Karish North, confirming a substantial gas discovery, with an initial estimate of 1 - 1.5 Tcf of Gas in Place. Initial in situ analysis suggests that the discovered gas has a higher liquids content than found in Karish Main. Further evaluation is currently being undertaken to further refine both the resource potential and liquids content of the discovery. The discovery will be appraised via a sidetrack to the Karish North well bore in 2H 2019 (subject to customary approvals) with the target of taking Final Investment Decision on its development in the near-to-medium term. The Karish North sidetrack does not utilise any of the drilling options available under the drilling contract with Stena and is expected to cost US$10 million. The Karish North discovery will be commercialised via a tie-back to the Energean Power FPSO, which is located 5.4km from the Karish North well. The FPSO is being built with total processing and export capacity of 8 bcma (775 mmcf/d), which will enable Karish North, and future discoveries, to be monetised.

Following the Karish North discovery well, the Stena DrillMAX returned to drilling the three Karish Main development wells. Drilling of Karish Main-03 and Karish Main-02 has now been finished and the wells are expected to be completed in 1H 2020. Results and data obtained from both of the wells drilled are positive:

-- a 45m gross gas column has been discovered in the D-sands interval with reservoir quality in line with pre-drill prognosis; and

-- fluid samples taken within the main reservoir sands suggest a higher condensate ratio than that used for the 2018 NSAI report.

The final development well, Karish Main-01, is now drilling ahead and is expected to conclude in 4Q 2019, after which all three wells that are required to deliver an initial 4.3 bcma of gas sales into the Israeli domestic market will have been completed.

Israel - Onshore

On 24 June 2019, Energean signed a Detailed Agreement with Israel Natural Gas Lines ("INGL") for the transfer of title (the "hand over") of the near shore and onshore part of the infrastructure that will deliver gas from the Karish and Tanin FPSO into the Israeli national gas transmission grid. As consideration, INGL will pay Energean 369 million Israeli New Shekels, approximately US$105 million, which will be paid in accordance with milestones detailed in the Agreement. The Agreement covers the onshore section of the Karish and Tanin infrastructure and the near shore section of pipeline extending to approximately 10km offshore. It is intended that the hand over to INGL will become effective shortly after the delivery of first gas from the Karish field in 1Q 2021. Following hand over, INGL will be responsible for the operation and maintenance of this part of the infrastructure. Energean will not incur any charges or tariffs for use of this infrastructure.

In 1H 2019, Energean recorded a $5 million inflow in relation to this agreement, in line with expectations.

Israel - Commercial

In May 2019, Energean submitted an updated proposal to supply the Republic of Cyprus with natural gas via a subsea pipeline. At the same time, Energean also entered into Letters of Intent to i) develop the pipeline project with VTTI Cyprus Limited, a company owned 50% by Vitol and the operator of the Vassilikos Terminal, and ii) to supply gas to private electricity producer P.E.C Power Energy Cyprus Limited. Energean also received an Expression of Interest to buy gas from a further private electricity producer in Cyprus and, post period end, has entered into two further Letters of Intent to supply gas to Independent Power Producers.

In the Israeli domestic market, in December 2018, Energean signed a contract with I.P.M Beer Tuvia ('I.P.M.') to supply an estimated 5.5 Bcm (0.2 Tcf) of gas over the life of the contract. The contract is contingent, inter alia, on Energean confirming sufficient additional quantities of gas and the Karish North discovery significantly increases the likelihood of its conversion into a firm contract.

Inclusive of the I.P.M. contract, Energean has contracted 4.7 bcma (445 mmcf/d) of gas sales, leaving a further 3.3 bcma (330 mmcf/d of spare capacity in its 8 bcma FPSO for additional sales of discovered gas at Karish North and the tie back of future discoveries.

In June 2019, Energean executed a Term Sheet with Mrc Alon Tavor Power Ltd., the winning bidder of the Alon Tavor tender, the first of the tenders to be published by the Israel Electric Company Ltd for the sale of five power station sites, as part of the electricity reform initiated by the Government of Israel. This Term Sheet includes material commercial terms for the sale of gas to Mrc for use in the natural gas fired generation units in the Alon Tavor site and both parties are working together to conclude a GSPA.

Israel - Other

In July 2019, Israel's Petroleum Council awarded Energean Israel (80%) and Israel Opportunity - Energy Resource LP (20%) four new licences for oil and gas exploration in the Israeli EEZ. Commitments on the licences are minimal.

The awarded Licences were granted for Block D, located 45 km off the Israeli coast - and include Licences 55,56,61,62 ("Zone D"), offered in the recent Bid Round published by the Israeli Ministry of Energy. Energean has identified a prospect within Zone D analogous to the prolific Tamar Sand fields (Karish, Tamar, Leviathan etc.) offshore Israel. The prospect is believed to extend towards the SW of the license contingent to further seismic processing. A relatively shallow Mesozoic four-way dip closure prospect was also identified.

Greece

Prinos, Prinos North & Epsilon

In the period to 30 June 2019, Energean produced 3,920 bopd from the Prinos, Prinos North and Epsilon fields.

Following the proposed acquisition of Edison E&P, Energean has commenced a review of capital allocation in order to prioritise those investment opportunities that deliver the highest stakeholder returns. As part of this, Energean has taken the decision to store the Energean Force drilling rig in Philippos port with resulting cancellation of near term planned rig-based activities. Ahead of conclusion of the review, activity at Prinos will be limited to well maintenance and other activities not requiring the Energean Force. Energean continues to view the Epsilon satellite accumulation as a priority investment opportunity that will deliver attractive returns for shareholders; as discussed below, excellent results have been achieved from the pre-drilling of vertical wells into this reservoir to date and Energean anticipates a resource upgrade at this asset before year end.

The Energean Force smart stacking operation was completed in July 2019 and entailed a series of heavy lift operations, which could not be performed over a live platform for safety reasons. As such, all wells had to be shut-in during each heavy lift operation, which resulted in a periodic loss of production post-period end, estimated to be approximately 400 bopd over a five-week period. During this time, Energean was also unable to perform well maintenance operations or intervention activities to maintain and / or increase production; these activities recommenced in 3Q 2019. Following shutdown of the facilities, the reservoir will also take some time to re-pressurise. Full Year production guidance is 3,400 - 3,600 bopd (from 4,300 - 4,800 bopd). A $40 million reduction to 2019 capital expenditure guidance accompanies this revision; Energean now expects to spend between $70 and $80 million in 2019 (previously $110 to 120 million). Longer term production guidance will be dependent on the results from the review.

The Epsilon Lamda development is progressing with platform installation planned for 1H 2020 and first oil in 3Q 2020. During the period, Energean completed the pre-drilling of the second well of the Epsilon Platform development, which confirmed and supplemented the findings of the first well. Total hydrocarbon column and potential net pay is still under evaluation, but the Hydrocarbons in Place for the Epsilon field are expected to increase as a result of the wells drilled to date. A CPR has been commissioned for publication in 4Q 2019 and the Deeper Volumes are expected to be included in an updated Field Development Plan. EL-3 is currently being progressed and pre-drilling is expected to complete in 4Q19.

Additional Activities

At Katakolo, legacy 3D seismic re-processing has been finalised in parallel with application for necessary environmental permits. Analysis suggests upside to previous in place volumes and a CPR will be commissioned to confirm this quantum. A decision on whether to farm down or take Final Investment Decision will be taken after the results from this analysis have been finalised.

At Ioannina, the Company completed the acquisition of 2D seismic in September 2019 and plans to move on to seismic evaluation in due course. The operator, Repsol, has applied for a one-year licence extension until October 2020.

At Aitoloakarnania, a tender for the 2D seismic acquisition has been issued with the programme expected to commence in early 2020.

In Montenegro, processing and interpretation of the recently acquired 3D seismic survey (completed February 2019) is ongoing. Results, which will enable Energean to better interpret prospectivity, are anticipated before Year End 2019.

Environment, Social and Governance ("ESG")

Sustainable development is integral to Energean's corporate philosophy. Energean is committed to creating value for all its stakeholders, and becoming the leading gas-focused, independent E&P Company in the Mediterranean whilst retaining focus on all environmental, social and economic aspects of the business. Energean's gas-focused portfolio means that the Company is already implementing its energy transition strategy: with pro-forma[6] 2P reserves c.80% gas and pro-forma 2022 production also being c.80% gas. The Company is committed to the highest standards of HSE regarding its employees, contractors, partners and the general public, as well as the mitigation of the Company's environmental impact. In 2019, Energean saw no incidents of non-compliance with laws and regulations in the social, environmental and economic area. Energean's Greenhouse Gas ("GHG") intensity, both direct and indirect, was materially lower compared to the prior corresponding period. The Company is on track to establish a Climate Change Department that will report directly to the Board and plans to disclose carbon emissions in line with Carbon Disclosure Project ("CDP") practises by the end of the year; from 2020, there will be a direct link between executive remuneration and ESG KPIs.

Outlook

Energean expects an active 18 months ahead. It expects to complete on its acquisition of Edison E&P in 4Q19 and, over the following 12 months, complete the integration of the two businesses, drawing out operational and functional synergies, whilst also high grading the portfolio for investment. Energean will also progress its sale of the non-core Edison assets. In Israel, Energean is on track to deliver first gas in Q1 2021 from Karish Main with no change to the expectation that the FPSO Hull will sail from China to Singapore at year end, with completion of the drilling programme at the same time. Energean will also look to start proving up additional hydrocarbons that can be easily monetised. In Greece, it will continue to focus on bringing the Epsilon field on stream and optimising existing production.

Financial Review

Financial results summary

 
                                          1H 2019   1H 2018    Change 
=======================================  ========  ========  ======== 
 Working interest production (kboe)           709       688      3.1% 
---------------------------------------  --------  --------  -------- 
 Av. daily working interest production 
  (boed)                                    3,920     3,801      3.1% 
---------------------------------------  --------  --------  -------- 
 Sales revenue ($m)                          40.0      26.3     52.1% 
---------------------------------------  --------  --------  -------- 
 Realised Oil Price ($/boe)                  58.3      57.7      1.0% 
---------------------------------------  --------  --------  -------- 
 Cost of sales ($m)                          28.6      17.8     61.0% 
---------------------------------------  --------  --------  -------- 
 Cost of production[7] ($m)                  13.5      13.2      2.3% 
---------------------------------------  --------  --------  -------- 
 Cost of production per barrel ($/boe)       19.0      19.4    (1.9%) 
---------------------------------------  --------  --------  -------- 
 Adjusted EBITDAX[8] ($m)                    23.6      16.7     41.1% 
---------------------------------------  --------  --------  -------- 
 Operating profit ($m)                        3.9      10.2   (62.2%) 
---------------------------------------  --------  --------  -------- 
 Cash flow from operating activities 
  ($m)                                       23.7      16.9     39.9% 
---------------------------------------  --------  --------  -------- 
 Cash capex[9] ($m)                         541.4     136.4    296.9% 
=======================================  --------  ========  ======== 
 
 
                                   1H 2019   FY 2018      Change 
================================  ========  ========  ========== 
 2P reserves[10] (million bbls)        349       349           - 
--------------------------------  --------  --------  ---------- 
 2C resources7 (million bbls)           48        48           - 
--------------------------------  --------  --------  ---------- 
 Net debt (cash) ($m)                390.4    (75.6)    (616.3%) 
--------------------------------  --------  --------  ---------- 
 Net debt / equity (%)               36.0%    (7.0%)    (614.1%) 
================================  --------  --------  ---------- 
 

Revenue, Production and commodity prices

Working interest production from Greece averaged 3,920 boepd, an increase of 3.1% for the period (1H 2018: 3,801 bopd).

Prinos production is sold at a $6.4/bbl discount to Urals Med blend, adjusted for final cargo API. 1H 2019 revenue includes sale of 2 cargoes (668,811 barrels) versus one cargo (417,566 barrels in total) sold in the equivalent period in 2018.

Cost of production

Cost of oil production is a non-IFRS measure that is used by the Group as a useful indicator of the Group's underlying cash costs to produce hydrocarbons. The Group uses the measure to compare operational performance period-to-period, to monitor cost and assess operational efficiency. Cost of oil production is calculated as cost of sales, adjusted for depreciation and hydrocarbon inventory movements.

The spare processing capacity in the Prinos infrastructure provides a high level of operational leverage. Production was relatively consistent between 1H 2018 and 1H 2019 and this has resulted in a 2% reduction in per barrel production costs, from $19.4/bbl in 1H 2018 to $19.0/bbl in 1H 2019. As production grows, Energean expects operating costs to continue to fall, reaching less than $10 /bbl if production of more than 10,000 bopd is achieved.

Depreciation

Depreciation increased by 33.8% to $17.7 million (1H 2018: $13.2 million) due to increased production and capex invested in Greece. On a per barrel of production basis, this represented a 29.2% increase to $24.4/boe (1H 2018: $18.9/boe) reflecting the increased capex.

Selling, General and Administrative expenses

Energean incurred S, G & A costs of $5.5 million in 1H 2019. This represents a 9.7% increase versus the comparable period last year (1H 2018: $5.1 million) and is due to the additional staffing and administrative costs caused by the rapid growth of the Group's portfolio, the efforts associated with developing the projects, and additional requirements associated with being a Premium listed entity. For the full year Energean expects S, G & A costs to be $15 million.

Other income

Other income of $1.0 million includes mainly other bank liability written off.

Finance costs

Interest expenses for the period were $16.8 million and are composed mainly of $6.6 million of interest expenses on the EBRD and RBL facilities secured on Energean's producing Greek assets, $3.6 million of interest expenses on deferred licence consideration on Karish &Tanin licenses and $6.7 million on the Senior Credit Facility for the Karish-Tanin Development, offset by capitalised interest of $12.4 million.

Crude oil hedging

Energean has no crude oil hedges outstanding as of 30 June 2019.

Taxation

Energean recorded tax expense of $1.4 million in 1H 2019 comprised totally from deferred tax expenses mainly due to leased asset additions (IFRS 16) and decrease in exchange losses (1H 2018: $5.3 million tax income).

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 as 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.

 
                                       1H 2019   1H 2018 
                                            $m        $m 
====================================  ========  ======== 
 Adjusted EBITDAX                         23.6      16.7 
------------------------------------  --------  -------- 
 Reconciliation to profit / (loss): 
------------------------------------  --------  -------- 
 Depreciation and amortisation          (17.7)    (13.0) 
------------------------------------  --------  -------- 
 Exploration and evaluation expense      (3.0)     (0.6) 
------------------------------------  --------  -------- 
 Other income/(expense)                    1.0       7.4 
------------------------------------  --------  -------- 
 Finance expenses                        (6.7)     (6.5) 
------------------------------------  --------  -------- 
 Finance income                            0.8       0.4 
------------------------------------  --------  -------- 
 Gain on derivative                          -      96.7 
------------------------------------  --------  -------- 
 Net foreign exchange                    (1.0)    (18.7) 
------------------------------------  --------  -------- 
 Tax                                     (1.4)       5.3 
------------------------------------  --------  -------- 
 Profit / (loss) from continuing 
  operations[11]                         (4.5)      87.4 
====================================  ========  ======== 
 

Operating cash flow

Cash from operations before movements in working capital was $20.9 million, representing a 26.7% increase on the comparable period (1H 2018: $16.5 million). After adjusting for working capital movements, cash from operations was $23.7 million, a 39.9% increase on the comparable period (1H 2018: $16.9 million).

Capital Expenditure

Capital Expenditure is defined as additions to property, plant and equipment and intangible exploration and evaluation assets less lease asset additions, asset additions due to decommissioning provisions, capitalised share-based payment charge, capitalised borrowing costs and certain other non-cash adjustments. The Directors believe that capital expenditure is a useful indicator of the Group's organic expenditure on oil and gas development assets, Exploration and Evaluation assets incurred during a period because it eliminates certain accounting adjustments such as capitalised borrowing costs and decommissioning asset additions.

 
                                            6 months ended 30 June 
                                              2019         2018 
                                             $'000         $'000 
========================================  ===========  ============ 
 Additions to property, plant and 
  equipment                                   336,694       687,484 
 Additions to intangible exploration 
  and evaluation assets                        37,550         2,215 
 Less: 
 Leased assets additions                      (9,791)             - 
 Capitalized borrowing cost                  (12,412)       (1,386) 
 Capitalised share-based payment 
  charge                                      (1,164)         (356) 
 Capitalised depreciation                     (1,573)       (1,232) 
 Change in environmental rehabilitation 
  provision                                   (2,356)         (726) 
 Acquisition of subsidiary                          -     (580,521) 
 Total capital expenditures                   346,948       105,478 
 Movement in working capital                  194,434        30,912 
 Cash capital expenditures per the 
  cash flow statement                         541,383       136,390 
 

Cash capital expenditure in 1H 2019 amounted to $541.4 million (1H 2018: $136.4 million). $496.3 million was invested in Israel (1H 2018: $96.3 million), $40.5 million in Greece (1H 2018: $40.0 million) and $4.5 million in Montenegro.

Energean guides to $775 - 800 million of accrued capex for the year. Cash capital expenditure will be contingent on payment timing at the end of the year.

Net cash / debt 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 capital.

 
                                                          31 December 
 Net debt reconciliation            1H 2019     1H 2018          2018 
                                         $m          $m            $m 
=================================  ========  ==========  ============ 
 EBRD facility ($200m)                157.2       121.8         144.3 
---------------------------------  --------  ----------  ------------ 
 Israel Project Finance facility      276.6           -             - 
  ($1,275m) 
---------------------------------  --------  ----------  ------------ 
 Total borrowings                     433.8       121.8         144.3 
---------------------------------  --------  ----------  ------------ 
 Cash and cash equivalents           (43.5)     (288.3)       (219.8) 
---------------------------------  --------  ----------  ------------ 
 Total net debt / (cash)              390.4     (166.5)        (75.6) 
---------------------------------  --------  ----------  ------------ 
 Capital                            1,084.7     1,038.0       1,087.8 
---------------------------------  --------  ----------  ------------ 
 Gearing ratio                          36%     (16.0%)        (7.0%) 
=================================  ========  ==========  ============ 
 

Post period end, in July 2019, Energean raised gross proceeds of $265 million through a new equity raise and $600m of bridge financing.

Principal risks and uncertainties

Strategic

-- Reserve replacement: the Group's long term future success depends on its ability to find, develop and acquire additional oil and gas reserves that are economically recoverable.

-- Geopolitical: the geopolitical situation in Israel may adversely affect the Group's business.

Health, Safety and Environmental

-- The Group is obliged to comply with health, safety and environmental regulations and cannot guarantee that it will be able to full adherence with these regulations.

Project Execution and Production Operation

-- Project execution: the Group's success will be partly dependent upon completing the Karish-Tanin development on budget and on schedule. Whilst the execution strategy has been designed to mitigate this risk as far as possible, any delay in project delivery could have an impact on the Group's Gas Sales and Purchase contracts.

-- Production: the Group's success will be partly dependent upon continuing production from Prinos; it is exposed to the effects of disruption, delays or interruptions of production from wells in this area.

-- Major cyber or information security incident.

Financial

-- Compliance with financial covenants: the Group's loan agreements are subject to restrictive debt covenants and security arrangements that may impact its ability to finance its operations.

-- Treasury and trading: the Group is exposed to associated risks surrounding foreign exchange and commodity price risk, although seeks to manage these risks where Management believe necessary.

-- Counterparty risks: including exposure to delayed payment, counterparty default or suspension, or termination of sales.

Governance and Compliance

-- Fraud, bribery and corruption.

Events since 30 June 2019

On 4(th) July 2019 the Group entered into a conditional sale and purchase agreement to acquire Edison Exploration & Production S.p.A. ("Edison E&P") from Edison S.p.A. for $750 million, to be adjusted for working capital, with additional contingent consideration of $100 million payable following first gas from the Cassiopea development (expected 2022), offshore Italy. Edison E&P's portfolio of assets includes producing assets in Egypt, Italy, Algeria, the UK North Sea and Croatia, development assets in Egypt, Italy and Norway and balanced-risk exploration opportunities across the portfolio. The Edison E&P portfolio adds working interest 2P reserves of 292 mmboe and 2018 net working interest production of 69 kboe/d. The initial consideration will be funded through a $600 million committed bridge loan facility and up to $265 million of equity financing through the Placing announced at the same day. A total of 23,444,445 new ordinary shares have been placed by Morgan Stanley & Co. International plc ("Morgan Stanley"), Stifel Nicolaus Europe Limited ("Stifel"), Peel Hunt LLP ("Peel Hunt") and RBC Europe Limited (trading as RBC Capital Markets) ("RBC") with both existing and new institutional investors at a price of GBP9.00 per Placing Share, raising proceeds of approximately US$265 million (approximately GBP211 million) before expenses. The Placing Shares being issued represent approximately 15.3 per cent. of the issued share capital of the Company prior to the Placing.

In July 2019, Israel's Petroleum Council has awarded the Group four new licences for oil and gas exploration in the Israeli EEZ.

Going concern

The Company monitors its funding position and its liquidity risk throughout the year to ensure it has access to sufficient funds to meet forecast cash requirements. Cash forecasts are regularly produced based on the Company's latest production and expenditure forecasts, management's best estimates of future commodity prices (based on Gas Sales Agreements, forward curves, adjusted for the Company's hedging programme) and the Company's borrowing facilities. Sensitivities are run to reflect different scenarios including, but not limited to, changes in oil and gas production rates, changes in commodity prices and delays or cost overruns on major development projects. This is done to identify risks to liquidity and covenant compliance and to enable management to formulate appropriate and timely mitigation policies.

At 30 June 2019, Energean Israel was yet to draw down $925 million on the project financing facility that will fund the Karish-Tanin development offshore Israel, and Energean retained sufficient liquidity within the Reserve Based Lending Facility that is funding development activity at Prinos, Prinos North and Epsilon in Greece. Energean retains sufficient financial headroom on the covenant restrictions contained within the various financing facilities, and the Company's forecasts show that this will be maintained for at least the 12 months following the approval of the 2019 Interim Report and Accounts.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and continue to adopt the going concern basis of accounting in preparing these interim condensed consolidated financial statements.

Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge:

1) The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

2) The interim management report contains a fair review of the information required by FTR 4.2R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);

3) The interim management report includes a true and fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Mathios Rigas Panos Benos

Chief Executive Officer Chief Financial Officer

11 September 2019 11 September 2019

Disclaimer

This report may contain forward-looking statements and information that both represents management's current expectations and beliefs and are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business and with any statement about the future.

Whilst Energean believes that such expectations and beliefs are reasonable in the light of the information available at this time, the actual outcomes may be materially different from the said statements, owing to factors beyond Energean's knowledge or control (or within Energean's control where, for example, the Company decides on a change in strategy).

Energean undertakes no obligation whatsoever to revise any such forward looking statements to reflect any changes (in expectations, beliefs, or circumstances, events, the Group's plans or strategy or otherwise). Accordingly, no reliance may be placed on such forward-looking statements or any figures therein.

INDEPENT REVIEW REPORT TO ENERGEAN OIL & GAS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and notes 1 to 26. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

11 September 2019

 
 Condensed Consolidated Income Statement Six months ended 30 June 
  2019 
----------------------------------------------------------------- 
 
 
                                                        6 months ended 30 June (Unaudited) 
                                                                   2019               2018 
                                                                  $'000              $'000 
 Consolidated income statement               Notes 
 Revenue                                       5                 40,012             26,257 
 Cost of Sales                                 6a              (28,611)           (17,775) 
------------------------------------------  -------  ------------------  ----------------- 
 Gross profit                                                    11,401              8,482 
 
 Administrative expenses                       6b               (5,345)            (4,835) 
 Selling and distribution expenses             6c                 (199)              (218) 
 Exploration and evaluation expenses           6d               (3,029)              (609) 
 Other income                                  6e                 1,025              7,393 
------------------------------------------  -------                      ----------------- 
 Operating profit                                                 3,853             10,213 
 Finance Income                                                     755                406 
 Finance Costs                                 7                (6,695)            (6,508) 
 Gain on derivative                            8                      -             96,709 
 Net foreign exchange loss                                      (1,020)           (18,742) 
------------------------------------------  -------                      ----------------- 
 (Loss)/profit) before tax                                      (3,107)             82,078 
 
 Taxation income / (expense)                   9                (1,381)              5,322 
------------------------------------------  -------                      ----------------- 
 (Loss)/profit for the period                                   (4,488)             87,400 
------------------------------------------  -------  ------------------  ----------------- 
 
 Attributable to: 
 Owners of the parent                                           (4,450)             90,069 
 Non-controlling Interests                                         (38)            (2,669) 
------------------------------------------  -------                      ----------------- 
                                                                (4,488)             87,400 
==========================================  =======  ==================  ================= 
 
 Basic and diluted total (loss)/earnings per share (cents per share) 
------------------------------------------------------------------------------------------ 
 Basic                                       10                 ($0.03)              $0.81 
 Diluted                                     10                 ($0.03)              $0.80 
------------------------------------------  -------  ------------------  ----------------- 
 
 
 Condensed Consolidated Statement of Comprehensive Income Six months 
  ended 30 June 2019 
-------------------------------------------------------------------- 
 
 
                                               6 months ended 30 June (Unaudited) 
                                                          2019               2018 
                                                         $'000              $'000 
 Consolidated statement of comprehensive 
  income 
 Profit/(loss) for the year                            (4,488)             87,400 
------------------------------------------  ------------------  ----------------- 
 
 Other comprehensive income: 
 Items that may be reclassified 
  subsequently to profit or loss 
 Cash Flow Hedge, net of tax                               691            (2,823) 
 Exchange difference on the translation 
  of foreign operations, net of 
  tax                                                    (971)                107 
------------------------------------------                      ----------------- 
 Other comprehensive loss after 
  tax                                                    (280)            (2,716) 
------------------------------------------  ------------------  ----------------- 
 
 Total comprehensive income/(loss) 
  for the period                                       (4,768)             84,684 
==========================================  ==================  ================= 
 
 Total comprehensive income/(loss) 
  attributable to: 
 Owners of the parent                                  (4,937)             87,353 
 Non-controlling Interests                                 169            (2,669) 
------------------------------------------                      ----------------- 
                                                       (4,768)             84,684 
 =========================================  ==================  ================= 
 
 
  Condensed Consolidated Statement of Financial Position Six months 
    ended 30 June 2019 
  ------------------------------------------------------------------ 
----------------------------------------------------------------------------------- 
                                                            6 months     Year ended 
                                                            ended 30    31 December 
                                                    June (Unaudited)           2018 
                                           Notes               $'000          $'000 
 ASSETS 
 Non-current assets 
 Property, plant and equipment              11             1,656,919      1,341,704 
 Intangible assets                          12                47,937         10,555 
 Goodwill                                   4                 75,800         75,800 
 Other receivables                          16                 3,771         71,845 
 Deferred tax asset                         13                13,944         15,532 
                                                           1,798,371      1,515,436 
---------------------------------------  -------  ------------------  ------------- 
 Current assets 
 Inventories                                15                12,166          9,912 
 Trade and other receivables                16                47,098         32,883 
 Cash and cash equivalents                  14                43,450        219,822 
---------------------------------------  -------                      ------------- 
                                                             102,714        262,617 
---------------------------------------  -------  ------------------  ------------- 
 Total assets                                              1,901,085      1,778,053 
---------------------------------------  -------  ------------------  ------------- 
 
 EQUITY AND LIABILITIES 
 Equity attributable to owners of 
  the parent 
 Share capital                              17                 2,068          2,066 
 Share premium                              17               658,805        658,805 
 Merger reserve                             17               139,903        139,903 
 Other reserve                                                 6,391          5,907 
 Foreign currency translation reserve                       (16,484)       (15,513) 
 Share-based payment reserve                                   8,308          6,617 
 Retained earnings                                            25,543         29,993 
                                                  ------------------ 
 Equity attributable to equity holders 
  of the parent                                              824,534        827,778 
---------------------------------------  -------  ------------------  ------------- 
 Non-controlling interests                  18               260,214        260,045 
 Total equity                                              1,084,748      1,087,823 
---------------------------------------  -------  ------------------  ------------- 
 Non-current liabilities 
 Borrowings                                 19               433,802        144,270 
 Deferred tax liabilities                   13                76,433         76,370 
 Retirement benefit liability               20                 3,720          3,659 
 Provisions                                 21                10,007          7,530 
 Other payables                             22                70,722         72,723 
                                                             594,684        304,552 
---------------------------------------  -------  ------------------  ------------- 
 Current liabilities 
 Trade and other payables                   22               221,653        385,678 
                                                             221,653        385,678 
---------------------------------------  -------  ------------------  ------------- 
 Total liabilities                                           816,337        690,230 
                                                  ------------------ 
 Total equity and liabilities                              1,901,085      1,778,053 
---------------------------------------  -------  ------------------  ------------- 
 

Approved by the Board on 11(th) September 2019

 
 Matthaios Rigas             Panos Benos 
                             Chief Financial 
 Chief Executive Officer      Officer 
 
 
 Condensed Consolidated Statement of Changes in Equity Six months ended 30 June 2019 
------------------------------------------------------------------------------------ 
 
 
                                                           Share 
                                                           based                                                             Non 
                    Share        Share        Other      payment   Translation    Retained       Merger              Controlling 
                  Capital   Premium(1)   Reserve(2)   reserve(3)    Reserve(4)    earnings   reserve(5)      Total     Interests       Total 
                    $'000        $'000        $'000        $'000         $'000       $'000        $'000      $'000         $'000       $'000 
                 --------  -----------  -----------  -----------  ------------  ----------  -----------  ---------  ------------  ---------- 
 At 1 January 
  2018                917            -       73,750            -      (11,427)   (138,455)      139,903     64,688       224,294     288,982 
                 --------  -----------  -----------  -----------  ------------  ----------  -----------  ---------  ------------  ---------- 
 Retrospective 
  application 
  of IFRS 9             -            -            -            -             -     (4,337)            -    (4,337)                   (4,337) 
                 --------  -----------  -----------  -----------  ------------  ----------  -----------  ---------  ------------  ---------- 
 At 1 January 
  2018 
  (restated)          917            -       73,750            -      (11,427)   (142,792)      139,903     60,351       224,294     284,645 
                 ========  ===========  ===========  ===========  ============  ==========  ===========  =========  ============  ========== 
 Profit for the 
  period                -            -            -            -             -      90,069            -     90,069       (2,669)      87,400 
 Cash flow 
  hedge, net 
  of tax                -            -      (2,823)            -             -           -            -    (2,823)             -     (2,823) 
 Exchange 
  difference 
  on the 
  translation 
  of foreign 
  operations            -            -            -            -           107           -            -        107             -         107 
 Total 
  comprehensive 
  income                -            -      (2,823)            -           107      90,069            -     87,353       (2,669)      84,684 
                 --------  -----------  -----------  -----------  ------------  ----------  -----------  ---------  ------------  ---------- 
 Transactions 
 with owners 
 of the company                      -            -            -                                                 -                         - 
 IPO shares         1,016      462,101            -            -             -           -            -    463,117             -     463,117 
 Transaction 
  cost in 
  relation to 
  IPO and 
  new share 
  issue                 -     (23,068)            -            -             -           -            -   (23,068)             -    (23,068) 
 Employee share 
  schemes 
  (note 23)             -            -            -          608             -           -            -        608             -         608 
 Derecognition 
  of derivative 
  asset                 -            -     (67,505)            -             -      67,505            -          -             -           - 
 Advances for 
  shares                -            -            -            -             -           -            -          -        23,000      23,000 
 Shares issued 
  in settlement 
  of preference 
  shares 
  in subsidiary       129      223,871            -            -             -           -            -    224,000     (224,000)           - 
 NCI on 
  acquisition 
  of subsidiary         -            -            -            -             -           -            -          -       204,800     204,800 
 At 30 June 
  2018              2,062      662,904        3,422          608      (11,320)      14,782      139,903    812,361       225,425   1,037,786 
                 ========  ===========  ===========  ===========  ============  ==========  ===========  =========  ============  ========== 
 
 
  Condensed Consolidated Statement of Changes in Equity Six months ended 30 June 2019 
                                                            Share 
                                                            based                                                           Non 
                     Share        Share        Other      payment   Translation   Retained       Merger             Controlling 
                   Capital   Premium(1)   Reserve(2)   reserve(3)    Reserve(4)   earnings   reserve(5)     Total     Interests       Total 
                     $'000        $'000        $'000        $'000         $'000      $'000        $'000     $'000         $'000       $'000 
 At 1 January 
  2019               2,066      658,805        5,907        6,617      (15,513)     29,993      139,903   827,778       260,045   1,087,823 
                  ========  ===========  ===========  ===========  ============  =========  ===========  ========  ============  ========== 
 Loss for the 
  period                 -            -            -            -             -    (4,450)            -   (4,450)          (38)     (4,488) 
 Cash flow 
  hedge, net 
  of tax                 -            -          484            -             -          -            -       484           207         691 
 Exchange 
  difference 
  on the 
  translation 
  of foreign 
  operations             -            -            -            -         (971)          -            -     (971)             -       (971) 
 Total 
  comprehensive 
  income                 -            -          484            -         (971)    (4,450)            -   (4,937)           169     (4,768) 
                  --------  -----------  -----------  -----------  ------------  ---------  -----------  --------  ------------  ---------- 
 Transactions 
 with owners 
 of the company 
 Issuance of 
  shares                 2            -            -            -             -          -            -         2             -           2 
 Share plan 
  reserve                -            -            -        1,691             -          -            -     1,691             -       1,691 
 At 30 June 2019     2,068      658,805        6,391        8,308      (16,484)     25,543      139,903   824,534       260,214   1,084,748 
                  ========  ===========  ===========  ===========  ============  =========  ===========  ========  ============  ========== 
 
 

(1) The share premium account represents the total net proceeds on issue of the Company's shares in excess of their nominal value of 0.01p per share less amounts transferred to any other reserves.

(2) Other reserve are used to recognise remeasurement gain or loss on cash flow hedge and actuarial gain or loss from the defined retirement benefit plan. Furthermore, other reserve are used to recognise measurement gains from derivative asset, refer to note 8 for further detail of this transaction

(3) The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to note 23 for further details of these plans.

(4) The foreign currency translation reserve is used to record unrealised exchange differences arising from the translation of the financial statements of entities within the Group that have a functional currency other than US dollars.

(5) Refer to note 17

 
 Condensed Consolidated Statement of Cash Flows Six months ended 
  30 June 2019 
--------------------------------------------------------------------------------------------- 
                                                                 6 months ended 30 June (Unaudited) 
                                                                                         2019        2018 
                                                   Note                                 $'000       $'000 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Operating activities 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Profit / (loss) before taxation                                                      (3,107)      82,078 
 Adjustments to reconcile profit/(loss) 
  before taxation to net cash provided 
  by operating activities: 
 Depreciation, depletion and amortisation          11,12                               17,704      13,229 
 (Decrease)/increase in provisions                                                         50     (7,243) 
 Finance income                                                                         (755)       (406) 
 Finance costs                                       7                                  6,695       6,508 
 Fair value gain on derivative                       8                                      -    (96,709) 
 Other bank liabilities written                                                       (1,283)           - 
  back 
 Share-based payment charge                         23                                    527         252 
 Net foreign exchange gain/(loss)                                                       1,020      18,742 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Cash flow from operations before 
  working capital adjustments                                                          20,851      16,451 
------------------------------------------------  ------  -----------------------------------  ---------- 
 (Increase) in inventories                                                            (2,314)     (9,418) 
 Decrease/(increase) in trade and 
  other receivables                                                                   (1,507)       2,912 
 Increase in trade and other payables                                                   6,754       6,970 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Cash flow from operations                                                             23,784      16,915 
 Taxes paid                                                                             (133)           - 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Net cash inflow from operating 
  activities                                                                           23,651      16,915 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Investing activities 
 Payment for purchase of property, 
  plant and equipment                                                               (503,181)   (134,882) 
 Payment for purchase of intangible 
  assets                                                                             (38,202)     (1,508) 
 Acquisition of a subsidiary, net 
  of cash acquired                                   4                                      -    (32,746) 
 Interest received                                                                        725         406 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Net cash used in investing activities                                              (540,658)   (168,730) 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Financing activities 
 Proceeds from issue of share capital                                                       2     460,000 
 Drawdown of borrowings                                                               363,474      34,085 
 Proceeds from share capital increase 
  in subsidiary                                                                             -      23,000 
 Transaction costs in relation 
  to IPO and new share issue                                                                -    (19,459) 
 Advance payment from future sale 
  of property, plant and equipment 
  (INGL)                                            22                                  5,090           - 
 Repayment of obligations under                                                         (454)           - 
  leases 
 Debt arrangement fees paid                                                           (8,449)    (52,277) 
 Finance cost paid for deferred                                                       (4,492)           - 
  license payments 
 Finance costs paid                                                                  (14,689)     (9,646) 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Net cash from financing activities                                                   340,482     435,703 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Net increase / (decrease) in cash 
  and cash equivalents                                                              (176,525)     283,888 
------------------------------------------------  ------  -----------------------------------  ---------- 
 Cash and cash equivalents: 
 At beginning of the period                                                           219,822      15,691 
 Effect of exchange rate fluctuations 
  on cash held                                                                            153    (11,319) 
------------------------------------------------  ------  -----------------------------------  ---------- 
 At end of the period                               14                                 43,450     288,260 
------------------------------------------------  ------  -----------------------------------  ---------- 
 
 

Notes to the Condensed Interim Consolidated Financial Statements

1. Corporate Information

Energean Oil & Gas plc (the 'Company') was incorporated in England & Wales on 8 May 2017 as a public company with limited liability, under the Companies Act 2006. Its registered office is at 44 Baker Street, London W1U 7AL, United Kingdom. The Company and all subsidiaries controlled by the Company, are together referred to as "the Group".

The Group has been established with the objective of exploration, production and commercialisation of crude oil and natural gas in Greece, Israel, North Africa and the wider Eastern Mediterranean.

On 16 March 2018 the Company acquired the 50% of the preference shares of Energean Israel Limited ("Energean Israel") from its founding shareholders after paying total consideration of $10 million.

On 21 March 2018 the Company completed the admission of its shares to the Premium Segment of the London Stock Exchange.

On 29 March 2018, the Group, following a final investment decision in respect of the Karish and Tanin assets, subscribed for additional ordinary shares in Energean Israel for an aggregate consideration of $266.7 million, payable in cash. Upon completion of this subscription, the Group holds 70% of the shares in Energean Israel, with Kerogen Capital holding the remaining 30% (refer to note 4).

Based on the above, since 29 March 2018 Energean has consolidated Energean Israel in its consolidated financial statements.

Subsidiaries

 
Name of subsidiary       Country of incorporation   Principal activities       Shareholding     Shareholding 
                          / registered 
                          office 
                                                                            At 30 June 2019   At 31 December 
                                                                                                        2018 
                                                                                        (%)              (%) 
-----------------------  -------------------------  ---------------------  ----------------  --------------- 
                         22 Lefkonos Street, 
Energean E&P Holdings     2064 Nicosia 
 Ltd                      Cyprus                          Holding Company               100              100 
                                                              Oil and gas 
                                                             exploration, 
                         44 Baker Street,                     development 
Energean MED Limited      London W1U 7AL                   and production               100              100 
                                                              Oil and gas 
                         32 Kifissias                        exploration, 
Energean Oil &            Ave. 151 25 Marousi                 development 
 Gas S.A.                 Athens, Greece                   and production               100              100 
 
                           P.O. BOX 8, 64006                 Provision of 
                           Nea Karvali                        oil and gas 
Kavala Oil S.A.*           Kavala, Greece                support services             99.92            99.92 
                                                              Oil and gas 
                           22 Lefkonos Street,               exploration, 
Energean International     2064 Nicosia                       development 
 Limited                   Cyprus                          and production               100              100 
                                                              Oil and gas 
                         22 Lefkonos Street,                 exploration, 
Energean Israel           2064 Nicosia                        development 
 Limited (Note 4)         Cyprus                           and production                70               70 
                                                              Oil and gas 
                         22 Lefkonos Street,                 exploration, 
Energean Montenegro       2064 Nicosia                        development 
 Limited                  Cyprus                           and production               100              100 
Energean Israel          560A rue de Neudorf, 
 Finance SARL             L-2220, Luxembourg         Financing activities                70               70 
                         9, Metsada St., 
Energean Israel           Bnei Brak 5120109            Gas transportation 
 Transmission LTD         ISRAEL                           license holder                70               70 
 

* n 29 July 2019 Kavala Oil was merged with Energean Oil & Gas S.A. through absorption of 100% of the company's shares.

The Income Statement and Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and associated Notes to the Financial Statements for the financial year ended 31 December 2018 included in the 30 June 2019 half yearly financial report do not constitute the Group's statutory accounts, as defined under section 435 of the Companies Act 2006. The Group's statutory financial statements for the financial year ended 31 December 2018 have been audited by the Group's external auditor and filed with Companies House in the United Kingdom. The auditor's opinion on these accounts was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

The Group's interim condensed consolidated financial statements are unaudited but have been reviewed by the auditors and their report to the Company is included on page 13. These condensed consolidated interim financial statements of the Group for the six months ended 30 June 2019 were approved and authorised for issue by the Board of Directors on 11(th) September 2019

2. Basis of preparation

2.1 Basis of preparation

The unaudited condensed consolidated interim financial statements for the six months ended 30 June 2019 included in this interim report have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union, and unless otherwise disclosed have been prepared on the basis of the accounting policies set out in the Group's Annual Report for year ended 31 December 2018.

The unaudited condensed consolidated interim financial statements are prepared on a going concern basis as the Directors, having considered available relevant information, have a reasonable expectation that the Group has adequate resources to continue to operate for the foreseeable future.

The consolidated financial statements have been prepared on a historical cost basis and are presented in US Dollars, which is also the Company's functional currency, rounded to the nearest thousand dollars ($'000) except as otherwise indicated.

The US dollar is the currency that mainly influences sales prices and revenue estimates, and also highly affects its operations. The functional currencies of the Group's main subsidiaries are as follows: for Energean E&P Holdings Ltd, Energean Oil & Gas S.A., Kavala Oil SA and Energean Montenegro is Euro, for Energean International Limited and Energean Israel Limited is US$.

Comparative figures for the period to 30 June 2018 and 31 December 2018 are for the period ended on that date. The interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the consolidated financial statements in the Energean Oil & Gas plc Annual Report and Accounts for the year ended 31 December 2018. The significant judgements made by management in applying these policies, and key sources of estimation uncertainty are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2018, except for the adoption of the following standards and amendments:

New and amended accounting standards and interpretations

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2018, except for the adoption of new standards effective as of 1 January 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

IFRS 16 Leases

The Group adopted IFRS 16 Leases, for the year commencing 1 January 2019. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet accounting model. Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor.

On adoption of IFRS 16, the Group has recognised lease liabilities in relation to leases which were previously classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities have been measured at the present value of the remaining lease payments, discounted using the company's incremental borrowing rate as of 1 January 2019. The determination of whether there is an interest rate implicit in the lease, the calculation of the company's incremental borrowing rate, and whether any adjustments to this rate are required for certain portfolios of leases involves some judgement and is subject to change over time. In accordance with the transition provisions in IFRS 16 the modified retrospective approach has been adopted, with the cumulative effect of initially applying the new standard recognised on 1 January 2019.

Accordingly, the comparative information in these interim condensed consolidated financial statements has not been restated.

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard on transition: the use of a single discount rate to a portfolio of leases with reasonably similar characteristics and to not separate and account for both the lease and the associated non-lease components as a single combined lease component. The financial impact of transition to IFRS 16 for the first half of financial year 2019 has been summarised within this note. The Group has identified lease portfolios for property, oil and gas supply vessels and other support equipment, and other vehicles.

 
                                                 Gross value on transition 
 Lease portfolio                                                     $'000 
 Property leases                                                     2,435 
 Oil and gas supply vessels and other support 
  equipment leases                                                   7,152 
 Software License                                                       49 
 Other vehicles                                                        156 
 Total                                                               9,792 
 

The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:

 
                                                                  $'000 
 Operating lease commitments as at 31 December 2018               5,489 
 Weighted average incremental borrowing rate as at 1 January 
  2019                                                            6.38% 
 Discounted operating lease commitments at 1 January 2019         4,619 
 Less: 
 Commitments relating to short-term leases                      (1,087) 
 Add: 
 Payments in optional extension periods not recognised 
  as at 31 December 2018                                          6,260 
 Lease liabilities as at 1 January 2019                           9,792 
 

Financial impact of the transition

Income statement

The Group impact of the transition resulted in a net increase in operating costs, along with a $0.1m increase in finance costs. The Group has recognized depreciation on right-of-use assets for the first half of 2019 of $1.5m, of which $0.09m has subsequently been capitalized through the Group's normal operations in accordance with the relevant accounting policy. Interest on the Group's finance lease liabilities for the first half of 2019 was $0.1m.

 
                                                           30.06.2019 
  Impact of IFRS16 on the consolidated income statement     unaudited 
                                                                $'000 
 Cost of sales                                                (1,526) 
 Gross profit                                                 (1,526) 
 Administrative expenses                                        (131) 
 Operating profit                                             (1,657) 
 Finance cost                                                   (156) 
 Profit/(loss) for the period                                 (1,813) 
 Deferred tax credit                                          (1,634) 
--------------------------------------------------------  ----------- 
 

Balance sheet

The Group impact of the transition has resulted in higher property, plant and equipment and non-current lease liabilities. For short term leases (lease term less than 12 months) and leases of low value assets the Group has opted to recognize a lease expense on a straight-line basis as permitted by IFRS 16. Depending on the nature of the lease, this is either recognized as additions to property, plant and equipment, operating costs or administrative costs.

 
                                                        30.06.2019 
  Impact of IFRS16 on the consolidated balance sheet     unaudited 
                                                             $'000 
 Property, plant and equipment 
 Oil & gas asset                                             5,774 
 Other asset                                                 2,357 
 Lease Liabilities 
----------------------------------------------------- 
 Non-current                                                 4,317 
 Current                                                     3,786 
-----------------------------------------------------  ----------- 
 

3. Segmental Reporting

The information reported to the Group's Chief Executive Officer and Chief Financial Officer (Chief Operating Decision Makers) for the purposes of resource allocation and assessment of segment performance is focused on five operating segments: Greece (including production asset of Prinos and non-producing assets of Ioannina, Katakolo and Aitolokarnania), Israel, Egypt (for the period ended 30 June 2017 included non producing exploration asset of West Kom Ombo), Montenegro (including two non producing exploration assets) and New Ventures.

The Group's reportable segments under IFRS 8 Operating Segments are Greece and Israel. Segments that do not exceed the quantitative thresholds for reporting information about operating segments have been included in Other.

Segment revenues, results and reconciliation to profit before tax

The following is an analysis of the Group's revenue, results and reconciliation to profit before tax by reportable segment:

 
                                          Greece     Israel         Other &      Total 
                                                               intercompany 
                                                               transactions 
                                           $'000      $'000           $'000      $'000 
 Six months ended 30 June 2019 
  (unaudited) 
 Revenue                                  42,537          -         (2,525)     40,012 
 Adjusted EBITDAX[12]                     26,620    (1,367)         (1,692)     23,561 
 Reconciliation to profit before 
  tax:                                                                    - 
 Depreciation and amortisation 
  expenses                              (17,483)       (12)           (209)   (17,704) 
 Exploration and evaluation expenses         (2)       (54)         (2,973)    (3,029) 
 Other income/(expense)                    1,407          -           (382)      1,025 
 Finance income                              292        743           (280)        755 
 Finance costs                           (6,382)      (233)            (80)    (6,695) 
 Net foreign exchange gain/(loss)        (1,888)        851              17    (1,020) 
 Profit/(loss) before income tax           2,564       (72)         (5,599)    (3,107) 
 Taxation expense                        (1,344)       (26)            (11)    (1,381) 
 Profit / (loss) for the period            1,220       (98)         (5,610)    (4,488) 
------------------------------------- 
 Six months ended 30 June 2018 
  (unaudited) 
 Revenue                                  24,964          -           1,293     26,257 
 Adjusted EBITDAX                         18,466      (615)         (1,193)     16,658 
 Reconciliation to profit before 
  tax:                                                    0               0 
 Depreciation and amortisation 
  expenses                              (13,163)        (7)            (59)   (13,229) 
 Exploration and evaluation expenses        (18)          -           (591)      (609) 
 Other income/(expense)                    7,475          -            (82)      7,393 
 Finance income                               73        113             220        406 
 Finance costs                          (12,963)       (35)           6,490    (6,508) 
 Gain on derivative                            -          -          96,709     96,709 
 Net foreign exchange gain/(loss)        (9,541)   (10,973)           1,772   (18,742) 
 Profit/(loss) before income tax         (9,671)   (11,517)         103,266     82,078 
 Taxation income / (expense)               2,832      2,638           (148)      5,322 
 Profit / (loss) for the period          (6,839)    (8,879)         103,118     87,400 
-------------------------------------  ---------  ---------  --------------  --------- 
 

The following table presents assets and liabilities information for the Group's operating segments as at 30 June 2019 and 31 December 2018, respectively:

 
                                         Greece      Israel         Other &       Total 
                                                               intercompany 
                                                               transactions 
                                          $'000       $'000           $'000       $'000 
 
   Six months ended 30 June 2019 
   (unaudited) 
 Oil & Gas properties                   367,034   1,254,524           (627)   1,620,931 
 Other property, plant and equipment     33,453         575           1,960      35,988 
 Intangible assets                        9,222      32,921           5,794      47,937 
 Other assets                            67,283     129,216           (270)     196,229 
 Total assets                           476,992   1,417,236           6,857   1,901,085 
 Total liabilities                      261,929     553,346           1,062     816,337 
-------------------------------------  --------  ----------  --------------  ---------- 
 
   Year ended 31 December 2018 
 Total assets                           436,494   1,333,850           7,709   1,778,053 
 Total liabilities                      221,355     470,550         (1,675)     690,230 
-------------------------------------  --------  ----------  --------------  ---------- 
 

Segment Cash flows

 
                                         Greece      Israel         Other &       Total 
                                                               intercompany 
                                                               transactions 
                                          $'000       $'000           $'000       $'000 
 Six months ended 30 June 2019 
  (unaudited) 
 Net cash from (used in) operating 
  activities                             25,807     (3,062)           1,039      23,784 
 Net cash (used in) investing 
  activities                           (37,851)   (495,612)         (7,195)   (540,658) 
 Net cash from financing activities       7,515     333,348           (381)     340,482 
 Net increase/(decrease) in cash 
  and cash equivalents                  (4,529)   (165,326)         (6,537)   (176,392) 
 Cash and cash equivalents at 
  end of the period                          84      31,601          11,765      43,450 
------------------------------------  ---------  ----------  --------------  ---------- 
 Six months ended 30 June 2018 
  (unaudited) 
 Net cash from (used in) operating 
  activities                             20,619       (136)         (3,568)      16,915 
 Net cash (used in) investing 
  activities                           (45,509)    (96,232)        (26,988)   (168,729) 
 Net cash from financing activities      23,094     265,206         147,402     435,702 
 Net increase/(decrease) in cash 
  and cash equivalents                  (1,796)     168,838         116,846     283,888 
 Cash and cash equivalents at 
  end of the period                       5,621     160,282         122,357     288,260 
------------------------------------  ---------  ----------  --------------  ---------- 
 

4. Business combination

From 29 March 2018, Energean Israel was consolidated into the Group represented a business combination for which acquisition accounting was required in line with IFRS 3: Business Combinations. For a full description of this transaction please refer to note 6 of the Company's 2018 Annual Report and Accounts.

The identifiable assets acquired and liabilities assumed of the acquiree were recognised as of the acquisition date and measured at fair value as at that date. Any non-controlling interest in the acquiree was also recognised at fair value at the acquisition date. This resulted in an aggregate fair value of $682.7 million being allocated to the identifiable assets and liabilities acquired, prior to the recognition of a deferred tax liability of $79.0 million as further described below.

The 2018 interim condensed consolidated financial statements included the results of Energean Israel for the three month period ended 30 June 2018.

The fair values of the identifiable assets and liabilities of Energean Israel as at the date of acquisition were as follows:

 
                                                             Six months ended 30 
                                                           June 2018 (unaudited) 
                                                           Fair value recognised 
                                                                  on acquisition 
                                                                           $'000 
 Assets: 
 Property, plant and equipment                                           579,906 
 Intangible assets                                                           615 
 Trade and other receivables(1)                                          309,248 
 Cash and cash equivalents                                                 3,104 
-------------------------------------------------------  ----------------------- 
                                                                         892,873 
 Liabilities 
 Trade and other payables                                              (211,194) 
 Deferred tax liabilities                                               (78,012) 
-------------------------------------------------------  ----------------------- 
                                                                       (289,206) 
-------------------------------------------------------  ----------------------- 
 Total identifiable net assets at fair value                             603,667 
 Goodwill arising on acquisition                                          75,800 
 Fair value of non-controlling interest on acquisition                 (204,800) 
-------------------------------------------------------  ----------------------- 
 Fair value of purchase consideration transferred                        474,667 
 
 Acquisition - date fair value of consideration 
  transferred 
 Cash paid for the acquisition of 50% preference 
  shares                                                                  10,000 
 Cash paid at acquisition as advance for shares 
  issuance                                                                25,850 
 Cash paid after acquisition date for shares issuance                    240,817 
 Cash payable at 2018 reporting date                                       8,000 
 Derivative asset                                                        190,000 
-------------------------------------------------------  ----------------------- 
 Consideration transferred                                               474,667 
 
 The cash outflow on acquisition is as follow: 
 Net cash acquired with the subsidiary                                     3,104 
 Cash paid                                                              (35,850) 
-------------------------------------------------------  ----------------------- 
 Net consolidated cash outflow                                          (32,746) 
 

(1) Included in Trade and other receivables is an amount of $248.8 million receivable from Energean E&P Holdings due for share capital increases, of which $240.8 million was paid in April 2018.

The balances above which were increased as a result of fair value adjustments being applied upon acquisition are oil & gas properties and deferred tax liabilities.

Goodwill of $75.8 million had been recognised upon acquisition. An amount of $79.0 million was due to the requirement of IAS 12 to recognise deferred tax assets and liabilities for the difference between the assigned fair values and tax bases of assets acquired and liabilities assumed. The assessment of fair value of such licences is therefore based on cash flows after tax. Nevertheless, in accordance with IAS 12 Sections 15 and 19, a provision is made for deferred tax corresponding to the tax rate of Israel (23%) multiplied by the difference between the acquisition cost and the tax base. The offsetting entry to this deferred tax is goodwill. Hence, goodwill arises as a direct result of the recognition of this deferred tax adjustment ("technical goodwill"). None of the goodwill recognised will be deductible for income tax purposes.

5. Revenue

 
                               6 months ended 30 June (Unaudited) 
                                          2019               2018 
                                         $'000              $'000 
 Crude oil sales                        39,417             24,090 
 Rendering of services                       -              1,421 
 Petroleum products sales                  595                746 
--------------------------  ------------------  ----------------- 
 Total revenue                          40,012             26,257 
 

The Group's weighted average realised sale price for the six months ended 30 June 2019 was $58.3 (period ended 30 June 2018: $57.7)

6. Operating profit/(loss) before taxation

 
                                                      6 months ended 30 June (Unaudited) 
                                                                 2019               2018 
                                                                $'000              $'000 
 (a)    Cost of sales 
  Staff costs                                                   6,672              6,585 
  Operating costs                                               6,826              6,649 
  Depreciation and amortisation                                17,301             12,987 
  Movement in inventories of oil                              (2,188)            (9,669) 
 ------------------------------------------  ----  ------------------  ----------------- 
  Total cost of oil sales                                      28,611             16,552 
 
  Cost of services                                                  -              1,223 
 ------------------------------------------  ----  ------------------  ----------------- 
  Total Cost of sales                                          28,611             17,775 
 
 (b)    Administrative expenses 
  Payroll costs                                                 2,679              1,318 
  Depreciation and amortisation                                   404                206 
  Other General & administration 
   expenses                                                     2,262              3,311 
 ------------------------------------------  ----  ------------------  ----------------- 
  Total administrative expenses                                 5,345              4,835 
 (c)    Selling and distribution expense 
  Payroll costs                                                    27                 80 
  Other Selling and distribution 
   expense                                                        172                138 
 ------------------------------------------  ----  ------------------  ----------------- 
  Total selling and distribution 
   expense                                                        199                218 
 
 (d)    Exploration and evaluation expenses 
  Staff costs                                                     242                292 
  Third party fees                                              2,787                317 
 ------------------------------------------  ----  ------------------  ----------------- 
  Total exploration and evaluation 
   expenses                                                     3,029                609 
 (e)    Other operating (income)/expenses 
  Other income                                                  (711)               (55) 
        Write-back bank liabilities                           (1,283)                  - 
  Other expenses                                                  532                 89 
  Restructuring costs                                             383 
  Provision for litigation expenses 
   (note 21)                                                        -            (7,427) 
        Provision for bad debts                                    54                  - 
-----  -----------------------------------------   ------------------  ----------------- 
  Total other operating (income)/expenses                     (1,025)            (7,393) 
 

7. Net finance cost

 
                                              6 months ended 30 June (Unaudited) 
                                                           2019             2018 
                                                          $'000            $'000 
 
 Interest on bank borrowings                             13,267            6,054 
 Interest expense on long term payables                   3,580                - 
 Less amounts included in the cost of 
  qualifying assets                                    (12,412)          (1,386) 
-----------------------------------------  --------------------  --------------- 
                                                          4,435            4,668 
 Finance and arrangement 
  fees                                                    1,309            1,341 
 Other finance costs and bank charges                       617              295 
 Interest on obligations for leases                         168 
 Unwinding of discount                                      166              204 
 Total finance costs                                      6,695            6,508 
 Interest income from time deposits                       (755)            (406) 
 Total finance revenue                                    (755)            (406) 
-----------------------------------------  --------------------  --------------- 
 Foreign exchange losses/(gain)                           1,020           18,742 
 Net financing costs                                      6,960           24,844 
-----------------------------------------  --------------------  --------------- 
 

8. Gain on derivative / fair value measurements

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 Group had one material financial asset measured at fair value at 31 December 2017 which relates to the Energean Israel B shares, for full description of this transaction please refer to note 27.2 of the Company's 2018 Annual Report and Accounts.

The change in fair value of $96.7 million between 31 December 2017 and 30 June 2018 is included in "Gain on derivative" in the consolidated income statement for the period ended 30 June 2018 as it is due to changes in measurement assumptions. Upon recognition, this derivative was the only instrument in the Level 3 category of the fair value hierarchy.

There were no transfers in or out of this category in the period, and the only movement in the category relates to the increase in fair value of the derivative.

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 30 June 2019 
                                                       (Unaudited) 
                                        Level 1     Level 2     Level 3       Total 
                                          $'000       $'000       $'000       $'000 
                                     ----------  ----------  ----------  ---------- 
 Financial assets 
 Trade and other receivables 
  (note 16)                                   -       2,455           -       2,455 
 Cash and cash equivalents 
  and bank deposits (note 14)            43,450           -           -      43,450 
-----------------------------------  ----------  ----------  ----------  ---------- 
 Total                                   43,450       2,455           -      45,905 
-----------------------------------  ----------  ----------  ----------  ---------- 
 Financial liabilities 
 Financial liabilities held 
  at amortised cost: 
 Borrowings (note 19)                         -     433,802           -     433,802 
 Trade and other payables 
  (note 22)                                   -     217,876           -     217,876 
-----------------------------------  ----------  ----------  ----------  ---------- 
 Total                                        -     651,678           -     651,678 
-----------------------------------  ----------  ----------  ----------  ---------- 
 
 
                                         Fair value hierarchy as at 31 December 2018 
                                         Level 1      Level 2      Level 3        Total 
                                           $'000        $'000        $'000        $'000 
                                     -----------  -----------  -----------  ----------- 
 Financial assets 
 Trade and other receivables 
  (note 16)                                    -        1,486            -        1,486 
 Cash and cash equivalents 
  and bank deposits (note 14)            219,822            -            -      219,822 
-----------------------------------  -----------  -----------  -----------  ----------- 
 Total                                   219,822        1,486            -      221,308 
-----------------------------------  -----------  -----------  -----------  ----------- 
 
   Financial liabilities 
 Financial liabilities held 
  at amortised cost: 
 Borrowings (note 19)                          -      144,270            -      144,270 
 Trade and other payables 
  (note 22)                                    -      452,332            -      452,332 
-----------------------------------  -----------  -----------  -----------  ----------- 
 Total                                         -      596,602            -      596,602 
-----------------------------------  -----------  -----------  -----------  ----------- 
 

9. Taxation

(a) Taxation charge

 
                                        6 months ended 30 June (Unaudited) 
                                                     2019             2018 
                                                    $'000            $'000 
 Corporation tax - current year                         -            (500) 
 Corporation tax - prior years                       (11)            (129) 
 Deferred tax (Note 13)                           (1,370)            5,951 
-----------------------------------  --------------------  --------------- 
 Total taxation income / (expense)                (1,381)            5,322 
-----------------------------------  --------------------  --------------- 
 

(b) Reconciliation of the total tax charge

The Group calculates its income tax expense based on IAS 34 by applying the estimated weighted-average annual effective income tax rate to pre-tax income for the interim period.

The tax (credit)/charge recognised in the income statement is reconciled to the Group's weighted average tax rate of 44.4% (30 June 2018: 6.48% ). The differences are reconciled below:

 
                                                 6 months ended 30 June (Unaudited) 
                                                           2019                2018 
                                                          $'000               $'000 
 
 Profit/(loss) before tax                               (3,107)              82,078 
--------------------------------------------  -----------------  ------------------ 
 
 Tax calculated at the applicable tax 
  rates                                                     777            (20,520) 
 Impact of different tax rates                            (166)                (83) 
 Reassessment of recognized deferred tax 
  asset in the current period                             (251)               2,425 
 Permanent differences                                    (424)               5,254 
 Non recognition of deferred tax on current             (1,333)                   - 
  period losses 
 Tax effect of non-taxable income                                            18,375 
 Other adjustments                                           27                 (0) 
 Prior year tax                                            (11)               (129) 
--------------------------------------------  -----------------  ------------------ 
 Taxation income/(expense)                              (1,381)               5,322 
--------------------------------------------  -----------------  ------------------ 
 

10. Earnings per share

The earnings per share has been calculated by dividing the net profit or loss for the period by the weighted average number of shares outstanding during the period ended 30 June 2019 and 30 June 2018.

 
                                                   6 months ended 30 June (Unaudited) 
                                                               2019              2018 
                                                              $'000             $'000 
 
 Total (Loss)/Income attributable to equity 
  shareholders                                              (4,450)            90,069 
 Effect of dilutive potential ordinary shares                     -                 - 
----------------------------------------------  -------------------  ---------------- 
                                                            (4,450)            90,069 
 
                                                   6 months ended 30 June (Unaudited) 
                                                               2019              2018 
                                                             Number            Number 
 Number of shares 
 Basic weighted average number of shares                153,297,878       111,733,179 
 Dilutive potential ordinary shares                       1,529,538           659,050 
----------------------------------------------  -------------------  ---------------- 
 Diluted weighted average number of shares              154,827,416       112,392,229 
----------------------------------------------  -------------------  ---------------- 
 Basic earnings per share                             ($0.03)/share       $0.81/share 
----------------------------------------------  -------------------  ---------------- 
 Diluted income per share                             ($0.03)/share       $0.80/share 
----------------------------------------------  -------------------  ---------------- 
 

11. Property, plant and equipment

 
                              Oil and gas   Leased assets   Other property,       Total 
                               properties                         plant and 
                                                                  equipment 
 Property, plant and                $'000           $'000             $'000       $'000 
  equipment at Cost 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 1 January 2018                429,921               -            54,535     484,456 
---------------------------  ------------  --------------  ----------------  ---------- 
 Additions                        484,969               -             4,417     489,386 
 Capitalized borrowing 
  cost                              8,307               -                 -       8,307 
 Acquisition of subsidiary 
  (Note 4)                        579,688               -                80     579,768 
 Disposals                          (372)               -              (57)       (429) 
 Capitalized depreciation           2,574               -                 -       2,574 
 Change in environmental 
  rehabilitation provision          1,758               -                 -       1,758 
 Foreign exchange impact         (19,391)               -           (2,462)    (21,853) 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 1 January 2019              1,487,454               -            56,513   1,543,967 
---------------------------  ------------  --------------  ----------------  ---------- 
 Additions                        309,841               -               821     310,662 
 Adjustment on adoption 
  of IFRS 16 leases                     -           9,792                 -       9,792 
 Capitalized borrowing 
  cost                             12,312               -                 -      12,312 
 Capitalised depreciation           1,573               -                 -       1,573 
 Change in environmental 
  rehabilitation provision          2,356               -                 -       2,356 
 Foreign exchange impact          (3,097)               -             (344)     (3,441) 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 30 June 2019                1,810,439           9,792            56,990   1,877,221 
---------------------------  ------------  --------------  ----------------  ---------- 
 
 Accumulated Depreciation 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 1 January 2018                149,655               -            24,825     174,480 
---------------------------  ------------  --------------  ----------------  ---------- 
 Charge for the period 
 -Expensed                         33,194               -               893      34,087 
 -Capitalised to oil 
  and gas properties                    -               -             2,574       2,574 
 Foreign exchange impact          (7,727)               -           (1,151)     (8,878) 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 1 January 2019                175,122               -            27,141     202,263 
---------------------------  ------------  --------------  ----------------  ---------- 
 Charge for the period 
 -Expensed                         15,337           1,658               584      17,579 
 -Capitalised to oil 
  and gas properties                    -              90             1,483       1,573 
 Foreign exchange impact            (951)               -             (162)     (1,113) 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 30 June 2019                  189,508           1,748            29,046     220,302 
---------------------------  ------------  --------------  ----------------  ---------- 
 Net carrying amount 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 31 December 2018            1,312,332               -            29,372   1,341,704 
---------------------------  ------------  --------------  ----------------  ---------- 
 At 30 June 2019                1,620,931           8,044            27,944   1,656,919 
---------------------------  ------------  --------------  ----------------  ---------- 
 

Included in the carrying amount of leased assets at 30 June 2019 is right of use assets related to Oil and gas properties and Other property, plant and equipment of $5.7 million and $2.3 respectively.

The depreciation charged on these classes for the six month ending 30 June 2019 were $1.5 million and $0.3 million respectively

The additions to Oil & gas properties for the period of six months ended 30 June 2019 is mainly due to development costs of Karish field which related to the EPCIC contract (FPSO, Sub Sea and On-shore construction cost) at the amount of $182.9m and development drilling costs at the amount of $44.9m.

Borrowing costs capitalised for qualifying assets, included in oil & gas properties, for the six months ended 30 June 2019 amounted to $12.3 million (year ended 31 December 2018: $8.3 million). The weighted average interest rates used:

   --    9.62% (for the six months ended 30 June 2019) 
   --    7.0% (for the year ended 31 December 2018) 

12. Intangible assets

 
                                   Exploration and   Other Intangible 
                                 evaluation assets             assets    Total 
                                             $'000              $'000    $'000 
 Intangibles at Cost 
----------------------------- 
 At 1 January 2018                           3,611              1,662    5,273 
 Additions                                   5,227                  8    5,235 
 Capitalized borrowing costs                   950                  -      950 
 Acquisition of subsidiary                     616                  -      616 
 Exchange differences                         (94)               (29)    (123) 
-----------------------------  -------------------  -----------------  ------- 
 At 1 January 2019                          10,310              1,641   11,951 
-----------------------------  -------------------  -----------------  ------- 
 Additions                                  37,270                180   37,450 
 Capitalized borrowing costs                   100                         100 
 Exchange differences                         (33)               (16)     (49) 
-----------------------------  -------------------  -----------------  ------- 
 At 30 June 2019                            47,647              1,805   49,452 
-----------------------------  -------------------  -----------------  ------- 
 
 Accumulated Amortisation 
----------------------------- 
 At 1 January 2018                             261              1,012    1,273 
                               -------------------  -----------------  ------- 
 Charge for the period                           -                171      171 
 Exchange differences                            -               (48)     (48) 
-----------------------------  -------------------  -----------------  ------- 
 At 1 January 2019                             261              1,135    1,396 
-----------------------------  -------------------  -----------------  ------- 
 Charge for the period                           -                125      125 
 Exchange differences                            -                (6)      (6) 
-----------------------------  -------------------  -----------------  ------- 
 30 June 2019                                  261              1,254    1,515 
-----------------------------  -------------------  -----------------  ------- 
 
 Net Carrying Amount 
-----------------------------  -------------------  -----------------  ------- 
 At 31 December 2018                        10,049                506   10,555 
-----------------------------  -------------------  -----------------  ------- 
 At 30 June 2019                            47,386                551   47,937 
-----------------------------  -------------------  -----------------  ------- 
 

The additions to Intangible assets for the period of six months ended 30 June 2019 is mainly due to exploration drilling costs which related to the prospect Karish North at the amount of $26.0 million as well as seismic acquisition for Montenegro exploration licences of $4.6 million.

13. Net deferred tax (liability)/ asset

 
          Deferred tax   Property,    Right       Prepaid   Inventory       Tax         Staff       Accrued      Total 
  (liabilities)/assets       plant   of use      expenses                losses       leaving      expenses 
                               and    asset     and other                         indemnities     and other 
                         equipment    (IFRS   receivables                                       short--term 
                                        16)                                                     liabilities 
                             $'000    $'000         $'000       $'000     $'000         $'000         $'000      $'000 
----------------------  ----------  -------  ------------  ----------  --------  ------------  ------------  --------- 
 At 1 January 
  2018                    (70,017)                (3,656)         395    80,571           923       (2,650)      5,566 
----------------------  ----------  -------  ------------  ----------  --------  ------------  ------------  --------- 
 Acquisition 
  of subsidiary 
  (Note 4)                (79,117)                      -           -     1,099             -             6   (78,012) 
 Increase / 
  (decrease) 
  for the period 
  through: 
 profit or loss 
  (Note 9)                 (4,524)        -         1,841          45     7,677          (63)         7,147     12,123 
 other comprehensive 
  income                         -        -             -           -         -             -            87         87 
 Exchange difference         3,025        -           110         236   (3,733)          (40)         (200)      (602) 
----------------------  ----------  -------  ------------  ----------  --------  ------------  ------------  --------- 
 At 1 January 
  2019                   (150,633)        -       (1,705)         676    85,614           820         4,390   (60,838) 
----------------------  ----------  -------  ------------  ---------- 
Increase / 
 (decrease) 
 for the period 
 through: 
 profit or loss 
  (Note 9)                 (8,786)  (1,634)           286         783     5,419            34         2,527    (1,371) 
 other comprehensive 
  income                         -        -         (206)           -         -             -             -      (206) 
 Exchange difference           377     (11)            12        (23)     (458)            35           (5)       (73) 
---------------------- 
30 June 2019             (159,042)  (1,645)       (1,613)       1,436    90,575           889         6,912   (62,488) 
 

At 30 June 2019 the Group has unused tax losses of $ 364.7 million (as of 31 December 2018: $344.5 million) available to offset against future profits. Out of the total tax losses, $335.0 million relate to Greek operations and $29.7 million relate to Israeli operations.

The Israeli operations relate to the Karish license which is in development phase and expected to commence production by 2021. Tax losses incurred under Israeli licences can be utilised for an unlimited period and cannot be carried back.

The Greek tax losses largely relate to Prinos exploitation area, $333.8 million, which is the only producing asset of the Group, and $1.2 million relates to Ioannina and Aitoloakarnania areas which are in exploration phase as well as Katakolo area which is in development phase. Tax losses incurred under the Prinos licence (Law2779/1999) can be utilised to offset taxable profits until the termination of Prinos exploitation area.

A deferred tax asset of $90.6 million (as of 31 December 2018: $85.6 million) is recognised on tax losses of $364.7 million as at 30 June 2019. This represents the losses which are expected to be utilised based on the Group's projection of probable future taxable profits in the jurisdictions in which the losses reside.

14. Cash and cash equivalents

 
                                 6 months ended    Year ended 
                            30 June (Unaudited)   31 December 
                                           2019          2018 
                                          $'000         $'000 
 
Cash at bank                             33,441       207,043 
Restricted bank deposits                 10,009        12,779 
                                         43,450       219,822 
 

Bank demand deposits comprise deposits and other short-term money market deposit accounts that are readily convertible into known amounts of cash. The effective interest rate on short--term bank deposits was 1.19% for the six months period ended 30 June 2019 (year ended 31 December 2018: 1.33%).

Restricted bank deposits comprise mainly cash retained as a bank security pledge for the Group's performance guarantees in its exploration blocks of Israel, Montenegro, Ioannina and Aitolokarnania.

15. Inventories

 
                                   6 months ended    Year ended 
                              30 June (Unaudited)   31 December 
                                             2019          2018 
                                            $'000         $'000 
Raw materials and supplies                  4,589         5,407 
Crude oil                                   7,577         4,505 
 Total inventories                         12,166         9,912 
 

The Group's raw materials and supplies consumptions for the six months ended 30 June 2019 was $0.8 million (year ended 31 December 2018: $1.7million)

The Group did not record impairment and write-off charges on inventory for the period ended 30 June 2019 (year ended 31 December 2018: $1.0 million related to materials written off).

16. Trade and other receivables

 
                                                  6 months ended    Year ended 
                                             30 June (Unaudited)   31 December 
                                                            2019          2018 
                                                           $'000         $'000 
Trade and other receivables-Current 
Financial items: 
Trade receivables                                          2,455         1,462 
Receivables from related parties (note 
 24)                                                           -            24 
                                                           2,455         1,486 
Non-financial items: 
Deposits and prepayments                                  18,133        17,422 
Deferred insurance expenses                                7,548         6,139 
Government subsidies (2)                                   3,228         3,248 
Refundable VAT                                            15,336         4,187 
Reimbursement from insurance contracts                       398           401 
                                                          44,643        31,397 
Total trade and other receivables-Current                 47,098        32,883 
Trade and other receivables-Non Current 
Non-financial items: 
Deferred borrowing fees(1)                                     -        65,558 
Deferred Insurance expenses                                3,041         5,617 
Other non current assets                                     730           670 
Total trade and other receivables-Non 
 Current                                                   3,771        71,845 
 

(1) This item represents arrangement fees and issue costs that the Group has incurred in connection with Karish-Tanin debt raising, which completed on March 2, 2018.

Arrangement fees and issue costs are deducted from the debt proceeds on initial recognition of the liability and are amortised as finance costs over the term of the debt using the effective interest method.

(2) Government subsidies mainly relate to grants from Greek Public Body for Employment and Social Inclusion (OAED) to financially support 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.

Kavala Oil S.A. have participated in this scheme since July 2010 until subsidies ceased to be in force in January 2016. The subsidies balance outstanding at 30 June 2019 is for the period commencing 1 July 2010 until 31 December 2015.

In December 2015, the Group filed a petition against OAED, and the Greek state itself, seeking the payment of US$2.9 million (EUR2.5 million), which represent the outstanding balance until 31 December 2014. Following several postponements of the hearing initiated by the Greek state, the hearing took place on 14 June 2017 before the Administrative Court of Piraeus. By decision A6360/2017, the Administrative Court of Piraeus found itself as non-competent court in terms of forum and referred the case to the Three-Membered Administrative Court of Kavala. A new hearing date is still expected to be set by the Kavala court.

The Group is of the view, based on legal advice, that this petition will prevail.

17. Share capital

On 30 June 2017, the Company became the parent company of the Group through the acquisition of the full share capital of Energean E&P Holdings Limited, in exchange for 65,643,120 GBP0.01 ($0.013) shares in the Company issued to the previous shareholders. From that point, in the consolidated financial statements, the share capital became that of Energean Oil & Gas plc. The previously recognised share capital of $14.9 million and share premium of $125.8 million was eliminated with a corresponding positive merger reserve recognised of $139,903 thousand.

On 21 March 2018, the Company issued 72,592,016 new shares in relation to the placement of its initial public offering of ordinary shares at GBP4.55 per share. The table below sets out changes in the Company's share capital since 1 January 2018.

 
                             Equity share capital  Share capital  Share premium 
                               allotted and fully 
                                             paid 
                                           Number          $'000          $'000 
Issued and authorized 
At 1 January 2018                      70,643,120            917              - 
Issued during the year 
- IPO shares                           72,592,016          1,009        434,934 
- Group Restructuring                   9,095,900            129        223,871 
- Share based payment                     821,727             11              - 
At 31 December 2018                   153,152,763          2,066        658,805 
Issued during the year 
- Issued during the period                174,138              2              - 
At 30 June 2019                       153,326,901          2,068        658,805 
 

18. Non--controlling interests

 
 Name of subsidiary                    Voting rights        Share of loss              Accumulated balance 
                              6 months    Year ended    6 months ended 30           6 months    Year ended 
                              ended 30   31 December     June (Unaudited)           ended 30   31 December 
                      June (Unaudited)                                      June (Unaudited) 
                                  2019          2018      2019       2018               2019          2018 
                                     %             %     $'000      $'000              $'000         $'000 
 
Kavala Oil 
 S.A.                             0.08          0.08       (9)        (5)                 73            92 
                     -----------------  ------------  -------- 
Energean Israel 
 Ltd                             30.00         30.00       178    (2,664)            260,141       259,953 
 Total                                                     169    (2,669)            260,214       260,045 
 
 

Energean Israel Limited

On 29 March 2018, the Group, following a final investment decision in respect of the Karish and Tanin assets, after acquiring the 50% founders shares, subscribed for additional shares in Energean Israel for an aggregate consideration of $266.7 million, payable in cash. Upon completion of this subscription, the Group holds 70% of the shares in Energean Israel, with Kerogen Capital holding the remaining 30%. The fair value of the non-controlling interest at the date of the acquisition of the additional 20% and control of the company, amounted to $204.8 million (refer to note 4).

19. Borrowings

 
                                             6 months ended     Year ended 
                                        30 June (Unaudited)    31 December 
                                                       2019           2018 
                                                      $'000          $'000 
Net Debt 
Current borrowings                                        -              - 
Non-current borrowings                              433,802        144,270 
Total borrowings                                    433,802        144,270 
Less: Cash and cash equivalents and 
 bank deposits                                     (43,450)        (219,822) 
Net Debt (1)                                        390,352       (75,552) 
Total equity (2)                                  1,084,748      1,087,823 
Gearing Ratio (1/2):                                 35.99%        (6.95%) 
 
 

EBRD Senior Facility

On 30 January 2018, the Group's existing EBRD Senior Facility Agreement was amended and restated pursuant to the RBL Senior Facility Agreement, giving rise to a modification loss amount of $1.4 million included in Group's finance cost. The RBL Senior Facility Agreement comprises two facilities-a facility of up to $105.0 million with EBRD and the Black Sea Trade and Development Bank as lenders and a $75.0 million facility pursuant to which the Export-Import Bank of Romania Eximbank SA and Banca Comerciala Intesa Sanpaolo Romania S.A. (with 95% insurance cover from the Romanian ECA) as lenders. Proceeds from the Romanian Club Facility will finance exclusively 85% of the value attributable to goods and services under the GSP Engineering, Procurement, Construction and Installation Contract (EPCIC) contract. The facility is secured by substantially all of the assets of the subsidiary company Energean Oil & Gas S.A. and a guarantee from Energean E&P Holdings and a pledge of its shares in Energean Oil & Gas S.A. The facility will have a seven-year tenor and incurs interest on outstanding debt at US dollar LIBOR01 plus an applicable margin (4.9% for the $105.0 million facility and 3.0% for the $75.0 million facility). As at 30 June 2019 amount of $140.2 million has been drawn down from the EBRD Senior Facility (year ended 31 December 2018: $126.6 million).

EBRD Subordinated Facility

In July 2016, the Group signed a EBRD Subordinated Facility Agreement, a subordinated loan agreement with the EBRD, subsequently amended on 8 March 2017, for a $20 million facility to fund the Group's exploration activities. The facility is subject to an interest rate of 4.9% plus LIBOR01, in addition to fees and commission and an EBITDA participation amount of up to 3.5% of EBITDA (if EBITDA is positive) depending on the amount of the facility drawn.

On 28 February 2018, the Group's existing Subordinated Facility Agreement was amended and restated regarding the Maturity Date and EBITDA participation amount. As at 30 June 2019 amount of $20 million has been drawn down from the EBRD Subordinated Facility (year ended 31 December 2018: $20 million).

Senior Credit Facility for the Karish-Tanin Development:

On 2 March 2018, the Group entered into a senior secured project finance for its Karish-Tanin project amounting to $1,275 million. The loan is held at the Energean Israel Limited level (Energean 70%). Once drawn, interest is to be charged at LIBOR + 3.75% over months 1 to 12, LIBOR + 4.00% over months 13 - 24, LIBOR + 4.25% over months 25 - 36 and LIBOR + 4.75% over months 37 - 45. The facility matures in December 2021 and has a bullet repayment on maturity. There is a commitment fee of 30% of the applicable margin. As of 31 December 2018 the Group had paid a total amount of $61.5 million for debt arrangement and commitment fees.

As at 30 June 2019 amount of $350 million was drawn down from the $1.275 billion Karish-Tanin project finance facility.

Reconciliation of liabilities arising from financing activities

 
                                                                    Non cash changes 
                      31 December      Cash           Gross         Borrowing    Foreign    Other      Fair  30 June 
                             2018     flows           value   costs including   exchange              value     2019 
                                              on transition      amortisation     impact            changes 
                                                               of arrangement 
                                                                         fees 
                            $'000     $'000           $'000             $'000      $'000    $'000     $'000    $'000 
                          230,788   329,119           9,792          (46,609)         56  (1,365)       897  522,678 
Long -term                                                           (50,356) 
 borrowings               144,270   339,825               -              [13]         63                  -  433,802 
Long -term 
 payables                       -     5,090               -                47         29                  -    5,166 
Lease liabilities               -     (454)           9,792               166       (36)  (1,365)         -    8,103 
Deferred license 
 payments                  86,518  (15,342)               -             3,534          -                  -   74,710 
Asset held 
 to hedge long-term 
 borrowings                     -         -               -                 -          -                897      897 
 

20. Retirement benefit liability

20.1 Provision for retirement benefits

 
                                           6 months ended    Year ended 
                                      30 June (Unaudited)   31 December 
                                                     2019          2018 
                                                    $'000         $'000 
Defined benefit obligation                          3,720         3,659 
Provision for retirement benefits 
 recognised                                         3,720         3,659 
Allocated as: 
Non current portion                                 3,720         3,659 
 

20.2 Defined benefit obligation

 
                              6 months ended 30 June (Unaudited) 
                                         2019               2018 
                                        $'000              $'000 
At 1 January                            3,659              3,288 
Current service cost                      248                114 
Interest cost                              31                 23 
Restructuring costs                      (85)                  - 
Benefits paid                           (112)              (111) 
Exchange differences                     (21)               (95) 
At 30 June / 31 December                3,720              3,219 
 

21. Provisions

 
                                  Decommissioning  Litigation and other     Total 
                                                                 claims 
                                            $'000                 $'000     $'000 
At 1 January 2018                           5,688                 9,306    14,994 
New provisions and changes 
 in estimates                               1,758              (10,989)   (9,231) 
Refunds                                         -                 3,666     3,666 
Payments                                        -               (1,887)   (1,887) 
Unwinding of discount                         351                     -       351 
Currency translation adjustment             (267)                  (96)     (363) 
At 31 December 2018                         7,530                     -     7,530 
Current provisions                              -                     -         - 
Non-current provisions                      7,530                     -     7,530 
                                  --------------- 
 
At 1 January 2019 
New provisions and changes 
 in estimates                               2,357                     -     2,357 
Unwinding of discount                         166                     -       166 
Currency translation adjustment              (46)                     -      (46) 
At 30 June 2019                            10,007                     -    10,007 
Current provisions                                                    -         - 
Non-current provisions                     10,007                     -    10,007 
 

Decommissioning provision

The decommissioning provision represents the present value of decommissioning costs relating to the Prinos asset in Greece.

According to the Prinos concession agreement ratified by the Greek Law, the Group is obliged to plug thewells drilled pursuant to its own drilling activities.

Reviews of estimated future decommissioning and restoration costs and the discount rate applied are carried out annually.

Litigation and Other Claims

As of 31 December 2017 the Group recorded a provision of $6.9 million for transfer pricing and income tax penalties following tax litigation in Greece, for the tax audit of the years 2008-2011 which was appealed. Furthermore, the Company recognised a provision for its unaudited tax years 2012 - 2016 of $4.2 million. This takes into consideration the outcome of the tax audit of the Company's transfer pricing policies finalised for fiscal years 2010- 2011, which were the subject of the appeal. This amount corresponds to corporate income tax amount of $2.3 million plus penalties and interest of $1.9 million.

Following the receipt in June 2018 of the final favourable decision from the appeal process, the provision for transfer pricing and income tax penalties has been reversed and recorded in "other income" (note 6e) in the consolidated income statement. During 2015, Energean had been required to make a mandatory prepayment of 50% of the total exposure, $3.7 million to the Greek tax authorities. Following the final decision, Energean received a refund of the aforementioned amount in October 2018.

22. Trade and other payables

 
                                             6 months ended    Year ended 
                                        30 June (Unaudited)   31 December 
                                                       2019          2018 
                                                      $'000         $'000 
Trade and other payables-Current 
Financial items: 
Trade accounts payable                              149,540       323,953 
Accrued Expenses                                     44,099        36,341 
Other creditors                                          73         2,372 
Deferred licence payments due within 
 one year (1)                                        14,843        15,342 
Other finance costs accrued                           5,535         3,148 
Short term lease liability                            3,786             - 
                                                    217,876       381,156 
Non-financial items: 
Social insurance and other taxes                      2,974         3,583 
Income taxes                                            803           939 
                                                      3,777         4,522 
Total                                               221,653       385,678 
Trade and other payables-Non Current 
Financial items: 
Deferred licence payments(1)                         59,867        71,176 
Long term lease liability                             4,317             - 
Advance payment (INGL)(2)                             5,166             - 
Non-financial items: 
Social insurance                                      1,372         1,547 
                                                     70,722        72,723 
 

(1) 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 30 June 2019 the total discounted deferred consideration was $74.7 million (As at 31 December 2018 $86.5 million)

(2) In June 2019, Energean signed a Detailed Agreement with Israel Natural Gas Lines ("INGL") for the transfer of title (the "hand over") of the near shore and onshore part of the infrastructure that will deliver gas from the Karish and Tanin FPSO into the Israeli national gas transmission grid. As consideration, INGL will pay Energean 369 million Israeli new shekel (ILS), approximately $102 million for the infrastructure being built by Energean which will be paid in accordance with milestones detailed in the agreement. The agreement covers the onshore section of the Karish and Tanin infrastructure and the near shore section of pipeline extending to approximately 10km offshore. It is intended that the hand over to INGL will become effective shortly after the delivery of first gas from the Karish field expected in 1Q 2021. Following hand over, INGL will be responsible for the operation and maintenance of this part of the infrastructure.

23. Share based payments

Analysis of share-based payment charge

 
                                            6 months ended 30 June (Unaudited) 
                                                         2019             2018 
                                                        $'000            $'000 
 
 Employee Share Award Plan                                691            3,000 
 Energean Long Term Incentive Plans                     1,000              511 
---------------------------------------- 
Total share-based payment charge                        1,691            3,511 
 Capitalised to intangible and tangible 
  assets                                                1,164            1,941 
 Expensed as administration expenses                      487            1,520 
Expensed to exploration and evaluation 
 expenses                                                  40               50 
 
Total share-based payment charge                        1,691            3,511 
 

Energean Long Term Incentive Plan (LTIP)

Under the LTIP, Senior Management can be granted nil exercise price options, normally exercisable from three to ten years following grant provided an individual remains in employment. The size of awards depends on both annual performance measures and Total Shareholder Return (TSR) over a period of up to three years. There are no post-grant performance conditions. No dividends are paid over the vesting period; however, Energean's Board may decide at any time prior to the issue or transfer of the shares in respect of which an award is released that the participant will receive an amount (in cash and/or additional Shares) equal in value to any dividends that would have been paid on those shares on such terms and over such period (ending no later than the Release Date) as the Board may determine. This amount may assume the reinvestment of dividends (on such basis as the Board may determine) and may exclude or include special dividends.

The weighted average remaining contractual life for LTIP awards outstanding at 30 June 2019 was 2.35 years, number of shares outstanding 1,150,006 and weighted average price at grant date GBP6.35.

Deferred Share Bonus Plan (DSBP)

Under the DSBP, the portion of any annual bonus above 30 per cent of the base salary of a Senior Executive nominated by the Remuneration Committee was deferred into shares.

Deferred awards are usually granted in the form of conditional share awards or nil-cost options (or, exceptionally, as cash-settled equivalents). Deferred awards usually vest two years after award although may vest early on leaving employment or on a change of control.

The weighted average remaining contractual life for DSBP awards outstanding at 30 June 2019 was 1.75 years, number of shares outstanding 81,620 and price at grant date GBP7.65.

Employee Share Award Plan (ESAP)

Most Group employees are eligible to be granted nil exercise price options under the ESAP.

On 24 May 2018, the Company, following its admission on the London Stock Exchange on 21 March 2018 granted conditional awards to most of the Group employees under the Energean 2018 Long Term Incentive Plan (LTIP) over 659,050 ordinary shares in Energean Oil & Gas plc.

Subject to the rules of the LTIP, half of the shares subject to each employee Award vested on 22 November 2018, and the remainder will vest on 22 November 2019.

The weighted average remaining contractual life for ESAP awards outstanding at 30 June 2019 was 2.4 months, number of shares outstanding 329,525 and price at grant date GBP5.00.

24. Related parties

24a. Related party relationships

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Directors of Energean Oil & Gas Plc are considered to be the only key management personnel as defined by IAS 24. The following information is provided in relation to the related party transaction disclosures provided in note 24b below:

Adobelero Holdings Co Ltd. is a beneficially owned holding company controlled by Panos Benos, the CFO of the Group. Growthy Holdings Co Ltd is a beneficially owned holding company controlled by Matthaios Rigas, the CEO of the Group. Oil Co Investments Limited is beneficially owned and controlled by Efstathios Topouzoglou, a Non-Executive Director of the Group. The nature of the Group's transactions with the above related parties is mainly financing activities.

Third Point Hellenic Recovery (Lux) S.A.R.L is a US based institutional investor that has historically supported the Group through debt funding and remains one of the Group's largest shareholders.

Kerogen Capital is an independent private equity fund manager specialising in the international oil and gas sector, which currently holds the 30% of Energean Israel ordinary shares not held by the Group.

Seven Maritime Company (Seven Marine) is a related party company controlled by one the Company's shareholder Mr Efstathios Topouzoglou. Seven Marine owns the offshore supply ships Valiant Energy and Energean Wave which support the Group's investment program in northern Greece.

Energean Israel Limited was an associate of the Group until 29 March 2018, when the company became a subsidiary to the Group. A Technical Services Agreement dated 19 December 2016 was signed between Energean International Limited and Energean Israel Limited for the provision of project advisory, technical and commercial consulting services between the two companies.

Abbey Investing: Property lease to other related party includes rental fees of a flat in London. The property is beneficially owned by Energean's executive director's spouse. The flat is used as a company flat for Energean's staff and consultants. The lease agreement was terminated in August 2018.

Capital Earth: During the period ended 30 June 2019 the Group received consultancy services from Capital Earth Limited, a consulting company controlled by the spouse of one of Energean's executive directors, for the provision of Group Corporate Social Responsibility Consultancy and Project Management Services.

24b. Related party transactions

Purchases of goods and services

 
                                                          6 months ended 30 June 
                                                                     (Unaudited) 
                                                                            2019   2018 
                                                                           $'000  $'000 
                               Nature of transactions 
 Other related party "Seven 
  Marine"                      Vessel leasing                              3,084  3,166 
 Other related party "Abbey 
  Investing"                   Property lease                                  -     17 
Other related party "Capital 
 Earth Ltd"                    Consulting services                            63      - 
                                                                           3,147  3,183 
 
 

Revenue and other income

 
                                                   6 months ended 30 June 
                                                              (Unaudited) 
                                                        2019         2018 
                                                       $'000        $'000 
                      Nature of transactions 
Energean Israel Ltd   Technical services                   -          226 
                                                           -          226 
 

24c. Related party balances

Payables

 
                                                  6 months ended    Year ended 
                                             30 June (Unaudited)   31 December 
                                                            2019          2018 
                                                           $'000         $'000 
                    Nature of balance 
Seven Marine        Vessel leasing                         5,953         4,053 
Capital Earth Ltd   Consulting services                        -           158 
 
                                                           5,953         4,211 
 

25. 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:

 
                                                     6 months ended   Year ended 
                                                30 June (Unaudited) 
                                                                     31 December 
                                                               2019         2018 
                                                              $'000        $'000 
Due within one year                                          12,464       16,176 
Due later than one year but within two years                  3,016        5,840 
Due later two years but within five years                       114          229 
                                                             15,594       22,245 
 

Performance guarantees

Energean Israel Limited, on 25 December 2016, submitted to the Israeli Petroleum Commissioner two irrevocable bank guarantees issued by HSBC of $10 million each, for each of the Karish and Tanin Leases, to secure compliance with the leases and related liabilities. The guarantees replace the respective guarantees in the amount of US$7.5 million each given by the previous leaseholders, Noble, Delek, and Avner.

The Group has issued bank guarantees in favour of the Israeli Petroleum Commissioner in respect of a committed minimum work program in five exploration blocks, Block 12, Block 21, Block 22, Block 23 and Block 31, which are located in the economic waters of the State of Israel.

The Group provided a performance guarantee for the amount of $0.7 million (EUR0.6 million) issued to the Greek Ministry of Environment Energy and Climate Change in respect of the contract with the Greek State for exploitation in Prinos.

The original $8.6 million (EUR7.9 million) performance bank guarantee related to Ioannina block was reduced to $6.7 million (EUR5.6 million), and will be further reduced from time to time to represent the remaining minimum expenditure obligations. For the security of any bank claim on the aforementioned guarantee, Energean Oil & Gas S.A. proceeded to restrict an amount of $2.5 million (EUR2.2 million), which corresponds to its 40% participating interest (refer to Note 14). The aforementioned bank guarantee is reduced to $nil on 12 July 2019 and therefore expired since the relevant actual expenditures exceeds the amount of the Minimum Expenditure Obligation as per Ioannina Lease Agreement.

As of 31 December 2018, the Group and its partner Repsol provided a bank guarantee for the total amount of $8.3 million in respect of the Lease Agreement of Aitoloakarnania Area in Greece, to satisfy the Minimum Expenditure Obligations of that agreement for the First Exploration phase. The Group proceeded to restrict an amount of $3.3 million (EUR2.9 million), which corresponds to its 40% participating interest.

A EUR3.0 million guarantee from Energean Montenegro Limited in favour of the state of Montenegro, is due to expire on 14 October 2020, relating to the Group's concession and mandatory work programme in Montenegro. The guarantee is secured by a EUR3.0 million cash deposit (refer to Note 14).

Legal cases and contingent liabilities

The Group had no any material contingent liabilities as of 30 June 2019 and 31 December 2018.

26. Subsequent events

On 4(th) July 2019 the Group entered into a conditional sale and purchase agreement to acquire Edison Exploration & Production S.p.A. ("Edison E&P") from Edison S.p.A. for $750 million, to be adjusted for working capital, with additional contingent consideration of $100 million payable following first gas from the Cassiopea development (expected 2022), offshore Italy. Edison E&P's portfolio of assets includes producing assets in Egypt, Italy, Algeria, the UK North Sea and Croatia, development assets in Egypt, Italy and Norway and balanced-risk exploration opportunities across the portfolio. The Edison E&P portfolio adds working interest 2P reserves of 292 mmboe and 2018 net working interest production of 69 kboe/d. The initial consideration will be funded through a $600 million committed bridge loan facility and up to $265 million of equity financing through the Placing announced at the same day. A total of 23,444,445 new ordinary shares have been placed by Morgan Stanley & Co. International plc , Stifel Nicolaus Europe Limited , Peel Hunt LLP and RBC Europe Limited (trading as RBC Capital Markets) with both existing and new institutional investors at a price of GBP9.00 per Placing Share, raising proceeds of approximately US$265 million (approximately GBP211 million) before expenses. The Placing Shares issued represent approximately 15.3 per cent. of the issued share capital of the Company prior to the Placing.

In July 2019 Israel's Petroleum Council has awarded the Group four new licences for oil and gas exploration in the Israeli Exclusive Economic Zone.

[1] Post-period end

[2] Excludes the equity and bridge financing raised to fund the Edison E&P acquisition, which occurred post period end.

[3] EBITDAX is defined in the Financial Review

[4] After working capital movements

[5] Before acquisitions and disposals

[6] Assuming the transaction completes

[7] Cost of sales before inventory movements and depreciation.

[8] Page 11 defines Adjusted EBITDAX, which Energean uses as a core business KPI.

[9] Before acquisitions and disposals.

[10] 2P and 2C numbers reflect the reclassification from the August 2018 NSAI Competent Persons' Report.

[11] Numbers may not sum due to rounding

[12] 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.

[13] Includes a total amount of $61.5 million for debt arrangement and commitment fees paid in 2018, deducted from the debt proceeds on initial recognition of the liability (March 2019) and are amortised as finance costs over the term of the debt using the effective interest method.

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

END

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