Energean takes final investment decision on Karish North

updated: 14 January 2021 at 9:36am Author: Josh White

(Sharecast News) - Energean has taken final investment decision on the Karish North gas development, offshore Israel, it announced on Thursday, 21 months after its discovery.
The FTSE 250 company said that in November, DeGolyer and MacNaughton issued an independent competent persons report that certified 2P reserves of 32 billion cubic metres of gas and 34 million barrels of liquids, or about 241 million barrels of oil equivalent in total, in Karish North as at 30 June.

It said the discovery would be commercialised with a low-cost tie-back to the Energean Power floating production, storage and offloading (FPSO) vesel, which would be 5.4 kilometres away.

Production from the first well at Karish North was expected to be up to 300 million standard cubic feet of gas per day, or about three billion cubic metres per year, with first production expected during the second half of 2023.

Initial capital expenditure in the project was expected to be approximately $150m (£109.93m), or 60 US cents per barrel of oil equivalent, with Energean estimating internal rates of return in excess of 40%.

On 13 January, the company signed an 18-month, $700m term loan facility agreement with JPMorgan and Morgan Stanley Senior Funding.

It said the primary uses of that would include accelerating the development of Karish North, enabling the capital expenditure on the project to be undertaken in advance of first gas from Karish Main.

Following first gas from Karish North, the overall Karish project well stock would be able to produce "well in excess" of the full eight billion cubic metre annual capacity of the FPSO, retaining operational redundancy in the well stock, and further enhancing overall project reliability.

The loan facility would also fund the $175m up-front consideration for the acquisition of the minority interest in Energean Israel, as it announced on 30 December, which would be payable on transaction close, which was expected in the first quarter.

Energean said it viewed the acquisition, for between $380m and $405m in total, as "highly value-accretive", with very attractive transaction metrics.

"I am delighted that we have taken final investment on Karish North, proving the value of the Energean Power FPSO as a quick and low-cost commercialisation route for our assets in Israel," said chief executive officer Mathios Rigas.

"We are also increasing the liquid processing capacity of our FPSO to process the additional volumes we discovered for minimal incremental cost.

"The new term loan and the extension of our project finance facility are a further testament of the confidence of the financial markets in Energean and I want to thank all the institutions for their support."

Rigas said the company remained committed to optimising its capital structure, to ensure that it maximised total shareholder returns while implementing its growth ambitions in Israel and the East Mediterranean.

"We remain on track to achieve our goal of delivering meaningful free cash flows that will support the payment of a sustainable dividend whilst also moving towards our stated target to achieve net zero emissions."

At 0941 GMT, shares in Energean were up 5.63% at 908.2p.