Energean : Israel 1Q 2024 Accounts

ENERGEAN ISRAEL LIMITED

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

31 MARCH 2024

ENERGEAN ISRAEL LIMITED

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF 31 MARCH 2024

INDEX

	Page
Interim Consolidated Statement of Comprehensive Income	3
Interim Consolidated Statement of Financial Position	4
Interim Consolidated Statement of Changes in Equity	5
Interim Consolidated Statement of Cash Flows	6
Notes to the Interim Consolidated Financial Statements	7-19

- - - - - - - - - - - - - - - - - - - -

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ENERGEAN ISRAEL LIMITED

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

THREE MONTHS ENDED 31 MARCH 2024

		31 March (Unaudited)
	Notes	2024	2023
		$'000	$'000
Revenue	3	266,286	158,853
Cost of sales	4	(126,268)	(83,905)
Gross profit		140,018	74,948
Administrative expenses	4	(3,409)	(3,922)
Exploration and evaluation expenses	4	-	(50)
Operating profit		136,609	70,976
Finance income	5	3,061	1,526
Finance costs	5	(46,554)	(32,487)
Net foreign exchange gains (losses)	5	125	(257)
Profit for the period before tax		93,241	39,758
Taxation expense	6	(13,331)	(9,482)
Net profit for the period		79,910	30,276
Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Loss on cash flow hedge for the period		(165)	-
Income tax relating to items that may be reclassified subsequently	9	38	-
Other comprehensive loss for the period		(127)	-
Total comprehensive income for the period		79,783	30,276

The accompanying notes are an integral part of the interim consolidated financial statements.

3

ENERGEAN ISRAEL LIMITED

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF 31 MARCH 2024

		31 March 2024	31 December
	Notes	(Unaudited)	2023
		$'000	$'000
ASSETS:
NON-CURRENT ASSETS:
Property, plant and equipment	7	2,776,839	2,797,831
Intangible assets	8	174,297	168,165
Other receivables	10	4,951	5,365
		2,956,087	2,971,361
CURRENT ASSETS:
Trade and other receivables	10	150,251	130,135
Inventories	11	11,275	7,141
Restricted cash	12(A)	1,291	22,482
Cash and cash equivalents		172,215	286,625
		335,032	446,383
TOTAL ASSETS		3,291,119	3,417,744
EQUITY AND LIABILITIES:
EQUITY:
Share capital		1,708	1,708
Share Premium		212,539	212,539
Hedges Reserve		(127)	-
Retained earnings		44,691	74,781
TOTAL EQUITY		258,811	289,028
NON-CURRENT LIABILITIES:
Senior secured notes	12(A)	2,590,102	2,588,492
Decommissioning provisions		86,467	92,613
Deferred tax liabilities	9	60,032	46,985
Trade and other payables	13	117,453	127,044
		2,854,054	2,855,134
CURRENT LIABILITIES:
Trade and other payables	13	178,254	273,582
TOTAL LIABILITIES		3,032,308	3,128,716
TOTAL EQUITY AND LIABILITIES		3,291,119	3,417,744

22 May 2024

Date of approval of the consolidated financial	Panagiotis Benos	Matthaios Rigas
statements	Director	Director

The accompanying notes are an integral part of the interim consolidated financial statements.

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ENERGEAN ISRAEL LIMITED

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

THREE MONTHS ENDED 31 MARCH 2024

		Share	Hedges	Accumulated
	Share capital	Premium	Reserve	losses	Total equity
	$'000	$'000	$'000	$'000	$'000
Balance as of 1 January 2024	1,708	212,539	-	74,781	289,028
Transactions with shareholders:
Dividend, see note 14	-	-	-	(110,000)	(110,000)
Comprehensive Income:
Profit for the period	-	-	-	79,910	79,910
Other comprehensive loss, net of tax			(127)	-	(127)
Total comprehensive income	-	-	(127)	79,910	79,783
Balance as of 31 March 2024	1,708	212,539	(127)	44,691	258,811
Balance as of 1 January 2023	1,708	212,539	-	(70,528)	143,719
Comprehensive Income:
Profit for the period	-	-	-	30,276	30,276
Other comprehensive loss, net of tax	-	-	-	-	-
Total comprehensive income	-	-	-	30,276	30,276
Balance as of 31 March 2023	1,708	212,539	-	(40,252)	173,995

The accompanying notes are an integral part of the interim consolidated financial statements.

5

ENERGEAN ISRAEL LIMITED

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS PERIOD ENDED 31 MARCH 2024

		31 March (Unaudited)
	Notes	2024	2023
		$'000	$'000
Operating activities
Profit for the period before tax		93,241	39,758
Adjustments to reconcile loss before taxation to net cash provided by:
Depreciation, depletion and amortisation	4	54,787	30,871
Compensation to gas buyers, payment made in advance	3	-	4,928
Finance Income	5	(3,061)	(1,526)
Finance expenses	5	46,554	32,487
Net foreign exchange loss /(gain)	5	(125)	257
Cash flow from operations before working capital		191,396	106,775
Increase in trade and other receivables		(20,495)	(18,315)
Decrease/(increase) in inventories		(4,134)	172
(Decrease)/increase in trade and other payables		(18,950)	314
Cash from operations		147,817	88,946
Income taxes paid		(1,946)	(368)
Net cash inflows from operating activities		145,871	88,578
Investing activities
Payment for purchase of property, plant and equipment	7(C)	(69,160)	(55,752)
Payment for exploration and evaluation, and other intangible assets	8(B)	(5,724)	(25,318)
Amounts received from INGL related to transfer of property, plant
and equipment	7(C)	1,712	-
Movement in restricted cash, net	12(A)	21,191	63,316
Interest received		3,870	1,509
Net cash outflow used in investing activities		(48.111)	(16,245)
Financing activities
Transaction costs in relation to senior secured notes issuance		-	(229)
Senior secured notes - interest paid	12(A)	(96,326)	(64,453)
Dividends paid	14	(110,000)	-
Other finance cost paid		(280)	(44)
Finance costs paid for deferred license payments	13(2)	(3,900)	-
Repayment of obligations under leases	13	(1,381)	(250)
Net cash outflow used in financing activities		(211,887)	(64,976)
Net increase (decrease) in cash and cash equivalents		(114,127)	7,357
Cash and cash equivalents at beginning of the period		286,625	24,825
Effect of exchange differences on cash and cash equivalents		(283)	(101)
Cash and cash equivalents at end of period		172,215	32,081

The accompanying notes are an integral part of the interim consolidated financial statements.

6

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: - GENERAL

1. Energean Israel Limited (the "Company") was incorporated in Cyprus on 22 July 2014 as a private company with limited liability under the Companies Law, Cap. 113. Its registered office is at Lefkonos 22, 1st Floor, Strovolos, 2064 Nicosia, Cyprus.
2. The Company and its subsidiaries (the "Group") has been established with the objective of exploration, production and commercialisation of natural gas and hydrocarbon liquids. The Group's main activities are performed in Israel by its Israeli Branch.
3. As of 31 March 2024, the Company had investments in the following subsidiaries:

			Shareholding	Shareholding
Name of subsidiary	Country of incorporation /	Principal	At 31 March	At 31 December
registered office	activities	2024	2023
			(%)	(%)
	121, Menachem Begin St.	Gas
Energean Israel	Azrieli Sarona Tower, POB
transportation	100	100
Transmission LTD	24,
license holder
	Tel Aviv 67012039 Israel
	121, Menachem Begin St.
Energean Israel Finance	Azrieli Sarona Tower, POB	Financing	100	100
LTD	24,	activities
	Tel Aviv 67012039 Israel

d. The Group's core assets as of 31 March 2024 included the following:

Country		Asset		Field		Working interest		Field phase
Israel		Karish (*)		Karish Main including	100%		Production
				Karish North
Israel		Tanin (*)		Tanin	100%		Development
Israel		Block 12		Katlan	100%		Appraisal
Israel		Blocks 21, 23, 31		Hercules and Hermes	100%		Exploration

1. The concession agreement expires in 2044.

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ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2: - Accounting policies and basis of preparation

The interim financial information included in this report has been prepared in accordance with IAS 34 "Interim Financial Reporting". The results for the interim period are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of the results for the period ended 31 March 2024. All such adjustments are of a normal recurring nature. The unaudited interim consolidated financial statements do not include all the information and disclosures that are required for the annual financial statements and must be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2023.

The financial information presented herein has been prepared in accordance with the accounting policies expected to be used in preparing the Group's annual consolidated financial statements for the year ended 31 December 2024 which are the same as those used in preparing the annual consolidated financial statements for the year ended 31 December 2023.

The directors consider it appropriate to adopt the going concern basis of accounting in preparing these interim financial statements.

Israel-Hamasconflict- The Group continues to monitor the ongoing conflict between the State of Israel and Hamas. While the situation has not impacted the Company's production from the FPSO (Floating Production Storage and Offloading vessel), it is not possible to predict whether the conflict will have a material adverse effect on our future earnings, cash flows and financial conditions.

NOTE 3: - Revenues

	31 March (Unaudited)
	2024	2023
	$'000	$'000
Revenue from gas sales (1)	182,245	113,090
Revenue from hydrocarbon liquids sales (2)	84,041	50,691
Compensation to customers (3)	-	(4,928)
Total revenue	266,286	158,853

(1) Sales gas for three months ended 31 March 2024 totaled approximately 1.2 bcm and for three months ended 31 March 2023 totaled approximately 0.72 bcm.

1. Sales from hydrocarbon liquids for three months ended 31 March 2024 totaled approximately 1.07 mmbbl and for three months ended 31 March 2023 totaled approximately 0.714 mmbbl.
2. During 2021 and in accordance with the GSPAs signed with a group of gas buyers, the Company paid compensation to these counterparties following delays to the supply of gas from the Karish project. The compensation is deducted from revenue in 2023, as variable consideration, as the gas is delivered to the gas buyers, in accordance with IFRS 15 Revenue Recognition.

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ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4: - Operating profit before taxation

31 March (Unaudited)
2024	2023
$'000	$'000

(a)	Cost of sales
Staff costs	4,186	1,885
Energy cost	420	1,288
Royalty payable	47,122	29,474
Depreciation (Note 7)	54,317	30,279
Other operating costs (1)	22,938	20,110
Oil stock movement	(2,715)	869
Total cost of sales	126,268	83,905
(b)	Administrative expenses
Staff costs	1,478	960
Share-based payment charge	181	99
Depreciation and amortisation (Note 7, 8)	470	592
Auditor fees	52	48
Other general & administration expenses (2)	1,228	2,223
Total administrative expenses	3,409	3,922
(c) Exploration and evaluation expenses
Other exploration and evaluation expenses	-	50
Total exploration and evaluation expenses	-	50

1. Other operating costs mainly consist of insurance and planned maintenance costs.
2. The Other general & administration expenses mainly consist of legal expenses, management fees recharged by other Energean Group companies and external advisors fees.

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ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5: - Net finance income/(expenses)

	31 March (Unaudited)
	2024	2023
	$'000	$'000
Interest on Senior Secured Notes (Note 12)	42,525	34,375
Interest expense on long terms payables (Note 13(2))	1,046	612
Less amounts included in the cost of qualifying assets (Note 7(A))	(3,686)	(3,568)
	39,885	31,419
Costs related to parent company guarantees	932	145
Other finance costs and bank charges	594	107
Unwinding of discount on trade payable (Note 13(3))	4,051	-
Unwinding of discount on provision for decommissioning	926	861
Unwinding of discount on right of use asset	226	15
Less amounts included in the cost of qualifying assets (Note 7(A))	(60)	(60)
	6,669	1,068
Total finance costs	46,554	32,487
Interest income from time deposits	3,056	654
Profits from valuation of hedging operations	5	-
Change of discount estimate on payables	-	872
Total finance income	3,061	1,526
Net foreign exchange profits (losses)	125	(257)
Net finance costs	(43,368)	(31,218)

NOTE 6: - Taxation

1. Corporate Tax rates applicable to the Company: Israel:

The Israeli corporate tax rate is 23% in 2024 and 2023. Cyprus:

For its activity in Cyprus, the Company is subject to corporation tax on its taxable profits at the rate of 12.5%.

Starting from 1 January 2024, the Company's control and management was transferred from the Republic of Cyprus ("Cyprus") to the United Kingdom ("UK") and as such the Company's tax residency migrated from Cyprus to UK.

2. The Income and Natural Resources Taxation Law, 5771-2011- Israel- the main provisions of the law are as follows:

n April 2011, the Knesset passed the Income and Natural Resources Tax Law, 5771-2011 ("the Law"), which imposed an oil and gas profits levy at a rate set out below. The rate of the levy is calculated according to a proposed R factor mechanism, according to the ratio between the net accrued revenues from the project and the cumulative investments as defined in the Law. A minimum levy of 20% is levied at the stage where the R factor ratio reaches 1.5, and when the ratio increases, the levy will increase gradually until the maximum rate of 50% until the ratio reaches 2.3. In addition, it was determined that the rate of the levy as stated will be reduced starting in 2017 by multiplying 0.64 by the difference between the corporate tax rate prescribed in section 126 of the Income Tax Ordinance for each tax year and the tax rate of 18%. In accordance with the corporate tax rate from 2018 onwards, the maximum rate will be 46.8%. In addition, additional provisions were prescribed regarding the levy, inter alia, the levy is recognised as an expense for the purpose of calculating income tax; the limits of the levy shall not include export facilities; the levy will be calculated and imposed for each reservoir separately (Ring Fencing); payment by the owner of an oil right calculated as a percentage of the oil produced, the recipient of the payment will be liable to pay a levy according to the amount of the payment received, and this amount will be subtracted from the amount of the levy owed by the holder of the oil right.

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