Energean plc (ENOG) Earnings Call Transcript & Summary

Good morning, and thank you for standing by. Welcome to the Energean plc First Half 2021 Results Conference Call. [Operator Instructions] I must advise you that this conference call is being recorded. . I would now like to hand the conference over to your speaker, Mr. Matthaios Rigas. Please go ahead.

Thank you, and good morning from me. Good morning to everyone. I would like to start by giving the key messages for our presentation today. When we closed Edison, we said that this would transform Energean and it actually has transformed us. We're announcing today record financial results that you will see later from Panos. Obviously, the big question and the big issue from many people is what has happened with our Karish project. We are firmly on track to deliver first gas in 2022, in the middle of 2022. We are on track with our net zero path. We are accelerating our targets potentially to earlier dates and beyond what we've already delivered and are delivering. We have a number of growth projects that are generating a number of catalysts that are coming next year. So those are the 4 key messages from today's presentation. I'm moving to Slide 6 to go into more details. On the operational side, our production has averaged 44,000 barrels a day, 72% of that is gas, which is outperforming across the portfolio in all countries in every part of the operation. We have taken over Edison assets. And with our excellent technical team, we have improved in a number of fronts, bringing us ahead of guidance until today. That, combined with the strength of the commodity prices has resulted in record financial results. Our revenue has increased to $206 million in the first 6 months compared to only $2 million in the last -- similar period last year. Same with EBITDAX, $75 million and $53 million of operating cash flow making Energean a very different company and a very different story than we were when we came to the market in 2018. This is not just a Prinos company with a big project in Israel. It's a company with a number of production legs, a number of different countries of operations that are contributing to our business and a number of exciting opportunities that we're focusing on. As you all know, we are leaders in our net zero commitment. We were the first E&P company in the world to commit to a net zero target and this is not just words. We are reducing our carbon intensity. We have reduced it to 18 kilos of CO2 per barrel of oil equivalent, that's a 19% decrease versus 2020 levels. We have done that through a number of measures. We have implemented green electricity on all our operated sites in Italy. We have zero-routine flaring and we are continuing our effort to get to a net zero target even sooner than our stated 2050 date. On the financial side, we issued a $2.5 billion bond in the first 6 months. It's the largest non-U.S. high-yield bond in our sector that has ever been issued. That has given us financial security has extended the average life of our debt to 6 years and has given us full funding of all our projects, not only the Karish project, but also the new projects that we are working on in Israel in the region. Beyond that, on the M&A side, we continued what we're good at, which is to do accretive cash flow deals. We bought the minority interest of Kerogen, the 30% that they held in Energean Israel. And we are moving now with 100% of the assets to monetize the full value that this fantastic project has for us. Beyond our existing projects, we have planned, we're talking about the Karish project, to deliver the project in the middle of 2022. We have now 1,700 workers on our FPSO working. That was the number at the end of August. And it's a huge increase from the previous numbers. This is a result of the very close relationship with our contractor, Technip with our subcontractor SCM, with acceleration measures that we're putting in place with incentivization. And the key message is that Energean is doing everything that is within our control to deliver the project on plan or even faster if we can do it. Beyond that, we have 5 high-return growth projects that have been sanctioned that we will go through today. We've signed a rig contract with Stena. Our new drilling program is starting in the first quarter of 2022, targeting 1 billion barrels of oil equivalent that could double size of this company in terms of resources. And the question of what are we going to do with the gas? Well, we are in a market that we're seeing gas prices that are probably at the highest levels ever, huge gas demand in the region. We're looking at a number of opportunities, not only in Israel, but also in the region. So I would like to focus a little bit more on Slide 7 on our net zero commitment because this is a key topic for us and a big one for the industry. As I mentioned earlier, we are the first one to commit to net zero. And as you can see from the slide on Page 7. We are continuing our efforts to get down to levels close to 7 kilos of CO2 per barrel produced. We have published our first climate change policy and we are looking to accelerate our net zero commitment ahead of 2015. We are rated to date AA by MSCI, outperformer by Sustainalytics, gold level by Maala on our ESG strategy. And our sustainability report, which is for the first time externally assured, is, in our view, leading the industry. So this is a big focus for us. We're looking to get to net zero by a number of activities that we can talk about later. And that will define our future as well as, obviously, the success of our projects. I hand over to Panos, our CFO, to walk you through the financials.

Thank you, Matthaios. Good morning all. As Matthaios mentioned, this was the first 6 months post closing of the Edison E&P acquisition with a new portfolio of assets under our full control. And the business delivered record operational financial performance driven by a combination, obviously, the strong recovery of commodity prices in the last semester, but most importantly, by the better productivity of our key assets. All our KPIs, as you see, show significantly better numbers versus both last year and guidance. Production at 44,000 barrels a day, revenue of over $200 million, EBITDAX at $75 million, operating profit -- operating cash flow of over $50 million. And net debt -- group net debt at $1.7 billion post the $2.5 billion nonrecourse bond we issued in March. The rest of the group has a net debt position of just over $200 million. All the metrics, as you see, are overshooting all our guidance numbers and most importantly, the last year. Next page. Given the continued uncertainties globally, especially around the pandemic and the measures that countries apply. We chose to maintain our 2021 guidance on our key metrics. So our guidance of production stays at 38,000 to 42,000 barrels a day, but we do expect to deliver at the higher end of the range. Cost of production of $200 million, exploration CapEx at around $60 million to $70 million, driven predominantly by our Glengorm operation campaign in the U.K.. Decommissioning not to exceed $5 million as we do manage -- our technical team is doing a fantastic job to manage the decommissioning liabilities and push back the activities to the future. The group net debt, we expect it to be at around $2 billion, and that will be driven by the success of our acceleration plans that Matthaios mentioned. And how quickly we can keep meeting the milestones of our key project in Israel. Medium-term target remains unchanged as we have communicated in the past and reflect an annualized position post achieving practical completion in our Karish project. We target to deliver from the combination of all our assets, 200,000 barrels a day of production to $2 billion of revenues, $1.4 billion of EBITDAX and the leverage well below the 2x EBITDA. As we have communicated before, our investment thesis and capital allocation policy is driven by sustainable dividend policy underpinned by secured long-term gas revenues with flow price mechanism, cautious and very selective investments on new projects, but now we focus on organic growth as we see plenty of opportunities in our expanded portfolio. And finally, optimization of capital -- of our capital structure with a focus not only to reduce the absolute debt quantum, but to properly manage its key characteristics. As the qualitative part of those is the cost of debt, which currently sits at around 5%, and the tenure duration that as mentioned before, sits just about 5 years. And as you know, these are equally important to achieve and deliver a robust and sustainable return to shareholders. A little bit more on our capital structure on Slide 12, which clearly demonstrates the strength of our balance sheet and liquidity position, more than $1 billion cash, majority of those available for our Israeli project, group net debt at $1.4 billion, but the net debt of the non Israel group is just over $200 million, and we expect this to drop towards the end of the year. Key characteristics post the bond issuance are the average life of our debt, which exceeds 5 years, and a blended cost of just around 5%. I don't think any other company in our sector and especially the geography we operate has this type of debt characteristics. On the final slide, the next slide, we try to show a debt profile and to demonstrate that this debt profile gives us more than enough liquidity and time to deliver on all our key capital-intensive projects before large maturities kick in. In addition to that, given the nature and the profile of our gas contracts that extend further to 2013, we have the opportunity if we choose to do so to smoothen this amortization profile even further into the next decade. So I'll leave you to that. And obviously, we will be available for any further questions on our results post the presentation. Matthaios, over to you.

Thank you, Panos. Let me focus a little bit more on the specific projects and the big topics of today's presentation. I'm moving to Slide 15 to talk about our flagship project, the Karish development, I repeat what I said before. We are firmly on track to deliver first gas in the middle of 2022. For those of you that can see the presentation, the shift is moving very fast. We have more than 1,700 people working. That was a number at the end of August. We are targeting the sale away from Singapore in the first quarter. It's a 35-day sailing time than a 3-month FPSO hookup and commissioning with first gas in the middle of 2022. From Slide 16, where you can see the ramp-up of resources, you can see the steady increase to the 1,700 number. We expect that to continue over the next couple of months and potentially peak at 1,800 or 1,900 over the next couple of months, that makes us not only confident about the timetable to sail away, but also confident that we could be able to accelerate with a number of measures that we are evaluating at the moment. And on Slide 17, there are a number of actions that we're looking to implement to accelerate that are being evaluated. We look at the cost benefit analysis of such initiatives, we believe that we will be able to deliver ahead of plan at the moment. Given the uncertainty of COVID, given the fact that we don't know what's going to happen over the next months, we are keeping our plan and our guidance that first gas will occur in the first half of -- in the middle of 2022. So we are reiterating the plan, but with a clear message that we could be moving faster if we maintain the existing workforce and the excellent performance that we're seeing today at the shipyard in Singapore. A lot of you may be worried about our gas contracts. We have 7.2 Bcm that are fully contracted, long-term contracts. These are 18 contracts that have been signed with the IPPs in Israel with power stations with the refinery with chemical plants that gives a plateau output of 7.2 Bcm, one of our buyer, [ Telemenia ] was unable to meet its conditions under the contract, and we mutually agreed to terminate. We have the next privatization coming up, the Hagit Power Station in Israel is expected in 2022. It's our view, I believe, in October. And I remind everyone that the buyers that contracted with us were the winners of the previous 2 power station privatizations. So we will be going after additional gas sales in Israel. And beyond that, we will be also looking at other routes to monetize our gas in Egypt, which is a country that demanding continuously more and more gas, but also the wider region, which is requiring more gas. We're seeing record numbers in terms of prices and demand in the region. So we feel very confident about our ability not only to fill up the FPSO at current or higher prices but also to fill up our next project, which is going to be developed post the wells that we're going to drill next year. Talking about our growth drilling campaign on Slide 19 because -- and again, it's not only about Karish. In my view, Karish will be delivered and it will be full based on the market dynamics at the moment. And we're targeting to drill up to 5 wells starting in 2022, 3 of them are firm, 2 of them are optional. The committed capital is only $80 million with possibilities of success ranging from 72% to 94%. I repeat, possibility of success of 72% to 94% in an area that has already infrastructure and markets that demand a lot more gas. We're seeing higher prices in the region. We are planning to use existing infrastructure pipelines that are already in place and are not being used, pipelines that we may look to install ourselves and idle LNG terminals that have the capacity to export LNG to Europe. So we're targeting another 1 billion barrels of oil equivalent from our wells. The drilling program is starting in a few months. And we see huge opportunities to add infrastructure to continue the growth and the fantastic journey that we have seen in the East Mediterranean. Moving to Egypt. Egypt has been performing exceptionally well. Production was at 31,500 barrels a day. All of our gas is contracted to the Egyptian government. We have seen a huge improvement in the receivables position since we took over Edison. The relationships are focused on the mid and most importantly, our commitment to invest in Egypt has resulted in the Egyptian government to improve significantly our position with receivables. On the 30th of June, standing at $159 million versus $221 million on the 31st of December 2019. We are continuing to optimize the portfolio. We're continuing to look for opportunity. And we have our growth project, the NEA/NI project that is ongoing. On Slide 22, you can see the progress. We have taken FID. We have awarded the EPCI contract. We are on track to complete the project with first gas expected in the second half of 2022 from the first well and the total project to be completed in the first half of 2023 that will continue delivering more gas from our projects in Egypt. Italy, I wouldn't say it has been a surprise for us because we saw the opportunity, but it may be a surprise to the market. All the assets have been performing better than what was expected. We have done, as I said before, so we believe we're good at. We bought ENI's shares in Vega and Rospo at zero cost, and we bought those shares when the oil price was significantly below where it is today, and we are seeing the benefit. Production is firmly above the 10,000 barrels, which was the upper end of our guidance. And we continue to see opportunities to improve our assets in Egypt -- sorry, in Italy. The big project, Cassiopea is on track for first gas in the first half of 2024. ENI is leading the operator. And obviously, we look forward to completing another gas project in Europe, especially with the gas prices that we're seeing today, which have reached record levels as I said before. I would like to close with the outlook, where we see this company going in the next couple of years. We reiterate our production guidance, as Panos mentioned, at the same levels in our CapEx. But we plan in the next 12 months to have first gas from Karish. We have -- we will have commenced our high-impact growth drilling program, both Athena and the other prospects in Israel are extremely valuable for us. We expect our first gas from NEA/NI in Egypt, we will have commenced our Epsilon development program in Greece, which is going to be funded through a guaranteed loan facility by the Greek state, supporting our program in Greece. We anticipate that we will be able to declare our future dividend policy very soon and we will continue to optimize our debt structure. On our net zero commitments, we have commenced the pre-FEED of the Prinos CCS in Greece. It's a project that we will focus a lot on in the next months. It's a project that has also been included in the funding plan of the Greek resilience and recovery fund. So we are using available funding from the European Union to promote these types of projects, and we aim to be the owner and operator of the first CCS project in the Mediterranean. We are targeting to accelerate our net zero commitment, and we're targeting to continue to be a leader not only on the operational side, but also on the ESG side. So with that, I would like to thank you for participating today, and look forward to answering any questions you may have.

[Operator Instructions] Our first question comes from the line of Nathan Piper from Investec.

I guess I've got 2 questions, please, or 2 areas to ask about. First of all, on the increased workforce. How is the productivity looking like relative to the increased number of workers? And do you think it is realistic that you'll be able to improve upon the time line that you've already set out? And then secondly, on the production capacity at Karish, what opportunities are there in the short term? So through 2022, '23, '24 to increase production beyond the estimates you put in your presentation. Is there a -- what available spot market or whatever is there? And maybe a last one, if you specifically, trying to commercialize additional volumes that you discover without installing new infrastructure, is there the potential to do gas swaps with other producers in Israel who are already exporting to Egypt?

Thank you, Nathan. I'll let Steve answer. Steve Moore, our Technical Director, is with me. He will answer the first question about productivity. Nick Witney, our Commercial Director, will cover your second question about the market and the dynamics to fill up the FPSO on the spot level. And then we'll talk about the third question, which is how we plan to either swap or grow going forward.

Yes. Hi, Nathan, it's Steve here. On the productivity, Nathan, on the manning generally, the productivity is still not as good as we would like it to be. COVID is causing issues, not just in terms of numbers of staff, but the way that work is executed, as you can imagine. And -- but we have a big focus with Technip and with Sembcorp to try to improve that. So not only have we increased the number of workers, we've increased the number of supervisors. We've got access now to a new pool of staff coming in from Malaysia and China, which is actually bringing in -- filling some of the gaps that we've lost in terms of supervision. But it's not an easy path. So we don't want to overpromise. The numbers increase is fantastic. And as Matthew said, we do expect those numbers to increase further over the next few weeks. Sembcorp is actually revisiting their plans as we speak. They should be sitting in Singapore, working out exactly with that number of people when we will reach mechanical completion. And within the next 2 or 3 weeks, we should have a better impression if the date for sailing away can be accelerated. It's not just about numbers, it's about mix of people as well. You don't just need bodies. You need the right bodies to be doing the work that remains.

That makes sense.

Nick?

Okay. So Nathan, I think there was a slight technical aspect to your second part of your question as well. So I'll attempt that as well or I think we need to. The capacity of the FPSO is, I think, as you've probably noted, we've announced as 8 Bcm or 800 million scuffs a day. So we have a little bit of capacity headroom available. So in the event that spot opportunities develop, and we are talking to market participants about how we might manage those. There isn't a liquid spot market in Israel as yet, but those are developing over the counter market, and there are always opportunities to renegotiate and optimize. So depending on nominations from our existing customers because I'll remind you, we have sold almost our entire reserve base under long-term contracts. We might have opportunities to more fully utilize that capacity from an early date. And also, obviously, if we are as successful as we expect to be with our 2022 drilling campaign, we will have additional resources to commit to the market. So we will potentially be able to increase our short-term sales.

I guess, Nick, what I meant was that the ramp up or the ramp-up you show on Slide 18 obviously reflects what you think the transition will be through the course of the contracts that you've already signed I guess my question really, Nick, was about particularly in '23 and '24 when you have got, in principle, quite a lot of capacity. And that's the sort of bit I was targeting in my question. So in '23 is 5.3 Bcm probably all you're going to produce that year? Or do you think there's an opportunity to improve that?

Yes, I suspect there is an opportunity to produce more, as you point out, some of that ramp is related to the transition of some of our customers between their existing supplier and ourselves, which is set out in their contracts, the structure and speed at which that can be done. But as Matthaios has mentioned, other Israeli gas suppliers are currently supplying at very high levels to export markets, driven by current high global prices, although Israel is a fairly isolated market. It is connected now physically to Egypt and via Egypt's LNG capacity in price terms, the market is connected to global gas prices. So in that horizon that you talk about, we can all see what European hub prices look like. They're very, very strong. So we'd expect strong demand to continue from those regional markets pulling excess gas away from Israel. And then, therefore, any opportunities in the local market or in those export markets would be largely price driven. And as we've always said and maintained, we always believe that we can be as competitive as anyone, if not more competitive, any one on price. So we would expect to be able to maximize those volumes during that period.

Nathan, there's another point that I would like to make here. I remind everyone that we have sold all our reserves through long-term contracts. These are with -- our 18 contracts with real buyers in Israel with firm take-or-pay provisions. So we need to make sure that if we start to sell in the spot market, we have enough reserves to cover our obligations under our long-term duration of those contracts. So our next drilling campaign is very important because that will add significant resource to us allowing us to be a lot more aggressive when it comes to our marketing plan. Today, we have to be conservative and make sure that we maintain enough resource to meet all our obligations. But beyond 2022, as I said, with a 70% to 90% probability of success drilling a well in Athena, which is next to our FPSO. We will be a lot more aggressive when it comes to spot sales or accessing regional markets, which we cannot today, not because we don't want to because we just don't have a gas. We were very successful in selling all our gas with long-term contracts.

That's clear. But I guess a follow on to the last question, Matthaios, around discovering your volumes. Yes.

Nathan, we cannot work on the plan of swapping 1 billion barrels of oil equivalent with others in the region and hoping that we will get that money. If you go to Slide 19, we have identified a number of routes. One is an export pipeline to Jordan, which has capacity. We are looking at another export pipeline to Egypt, probably in our next presentation to the market, we will be showing our wider plans for the region of how we can tie in all these new discoveries that we hope to make both oil and gas because we are -- I remind everyone that this is not only a gas story. We had about 30,000 barrels of liquids that will be produced from Karish through our FPSO and potentially from new FPSOs that we would need to bring in to add additional liquids. Also, today, with LNG prices at $11 or $12 per MMBtu, you can understand that a $4 or $4.50 price, which is where our floor prices are in Israel, make it extremely attractive for traders and buyers to buy this gas, liquefy it and ship it to the global markets. So we are in a great position of having already some infrastructure. We would need more. But with the demand that we see coming out in the region, I think we will be lower the next phase of our development. But as I said many times before, we will never become a continuous development story. First of all, we need to prove more resource. We need to deliver our projects, start paying dividends to our shareholders who have been not only patient but very supportive with us. And then we would look to the next phase of growth because Energean is not going to stop with just Karish and Tanin. We've grown, and I remind everyone from a company that was established back in 2007 buying Prinos for EUR 1 million to what is today a $2 billion company, and we will continue with the same pace, and we will continue to take advantage of opportunities in the region that we know very well, and we know how to navigate around politics, geopolitics, and bringing infrastructure regardless of difficulties, regardless of COVID and everything else that has been challenging as over the last months.

Our next question comes from the line of David Round from Stifel.

I've just got a couple of questions, please. Firstly, Egypt, I noticed quite a good performance from Abu Qir in the first half, and you're already talking about follow-on near-field opportunities. So just wondering if the potential you're seeing there is surprising you? And is there any thought as to accelerating work at Abu Qir? And my second question is just on Greece. And whether you're able to provide any update around Epsilon and what that could look like? Because obviously, with the volumes you're talking about, that could be an extremely [ viable ] project.

Sure. Yes. On Egypt, it's not a surprise at all. I mean when we looked at Egypt, we saw an asset, okay, it's an old asset. It's been in production for a long time. But we saw a lot of opportunities. The opportunities we've been working this year have been around optimizing the way the current wells are produced. It's around restructuring way pipelines are assigned or wells are assigned to pipelines and the way that the compression system is working. And that's given us around a 10% to 15% boost on top of what was being produced last year when operated by the previous owners. Yet there are a lot of opportunities for further drilling. NEA/NI is 3 fields that are going to be brought into production. There are actually another 3 discoveries that have not yet been included in that plant, and we're looking at 2 more phases, potentially simple tiebacks of additional discovered volumes. Within Abu Qir itself, although it's been in production for more than 30 years, first field in the Mediterranean in production in Egypt, there's still many pockets of gas. And what we have to do is we just have to confirm where those pockets of gas are. Some horizons are very mature, 80% recovery factors. Some are only at 50%. So there's plenty of opportunities to increase further, particularly if we work with the government to make it everybody worthwhile to everybody. There's also regional opportunities to tie back additional fields into the existing infrastructure, which is there. It's in very, very good condition. It's been well maintained over its life. We've got a very good workforce. There's no reason why we can't use the onshore facilities, particularly to treat additional gas volumes outside the area. So no, it wasn't a surprise. It's what we expect. It's one of the reasons we did the deal in the first place.

On your second question, David, Epsilon. Our contractor is standing by to start the project. Panos and the finance team are finalizing the details of the Greek State backed funding plan. Once all that is in place, we expect that to be in the next few weeks, we will start the project. We expect it to take 14 to 16 months to start producing. And yes, it will add significant value. It's a very nice project. The tax terms in Greece are great. We're carrying forward tax losses that are shielding us from tax payment. So the fiscal terms are great. We have an offtake agreement with BP. So it will add value to our Greek business. Although I have to say that our vision for the Prinos field in the Greek business goes from the existing production into Epsilon that then moves the Prinos field into becoming the first carbon storage project in the East Mediterranean. And that is going to be a hugely valuable asset for us. As I said, there's no capital commitment. So I don't want people to start to ask [ keep ] questions how much equity, how much debt, what's the -- what's the cost? We are doing the pre-FEED studies at the moment, but we can see the dynamics. And anybody that can see ahead in a region and a country that is emitting large quantities of CO2 that need to be handled. This is not only about our production. This is only also about the cement factories, the refineries, the steel mills and the other big emitters in the country. The only solution for those companies is to store that CO2 somewhere in that, somewhere is only Prinos. So Prinos can turn into a very valuable asset for us beyond oil production life. In a company that's planning to produce 200,000 barrels a day of oil equivalent and is focusing clearly on gas. And mature oilfield projects in shallow waters in Greece is clearly not a game changer, but the conversion of that field and the transition of that field into a storage project will be a game changer. And that is one of the big project and the big items that we will be looking to bring on stream over the next few years.

Our next question comes from the line of James Carmichael from Berenberg.

Just a couple of quick ones. Just on the -- first on the Dalia contract in Israel, I guess that's obviously like in the report that at risk sort of 0.8 Bcm. So just wondering if you could give a bit of color around that when that will be confirmed just whether that's sort of terminated or not? And then how quickly you might be able to replace those volumes, I guess, through the hedge tender being 1 likely opportunity? And then just looking at the incentivization payment you could get the people up to 1,700 in the yard. I'm just wondering how long that covers? I mean, is that single payment? Is that cover you all the way up to sail away or how should we think about that? Will sort of additional payments be needed to maintain the current time margins?

Nick, do you want to take the Dalia question?

Sure, sure. Obviously, what we can say and what we should say, are reasonably limited around a fairly commercially sensitive and confidential process. We have a long-term contract with Dalia as we do with many customers, which has provisions in it. Dealing with -- amongst other things, delays to our project, which obviously we're currently experiencing on Karish due largely to COVID. So while that process runs its course, we're also obviously in constant discussions with our customers in terms of commercial settlements, commercial optimization, restructuring. So those have some way to go. Nonetheless, as you sort of intimated, if we do get to the point where the contract is terminated. And I'm by no means suggesting that's a given. Then yes, we do have other options to replace those sales. Hagit, one you've mentioned, but also Matthaios been suggesting exports or something we're focusing very much on the moment that there is very strong and immediate demand in the region. So that's primarily is about access to infrastructure. Up till now, we've been lucky enough to be in control of our own infrastructure. So access has been straightforward, but we're talking about third-party held infrastructure here in the short term. So that's a little bit more commercially complex. So I don't want to sound complacent, I'm certainly not complacent. But these are long-term contracts, and the commercial balance of a 15-year contract will swing from time to time from party to party. I'll remind you all where gas prices were this time last year when there was a lot of conversation in the Israeli market about how expensive their gas was compared to global prices, quite a lot less conversation this year about how cheap it is compared to global prices. So as I said, I see this is part of the push peak full view of a long-term gas contract and we will either retain value as a customer or we will replace that volume pretty promptly at similar or better prices.

Yes. One comment from me on this, please. I remind everyone also that we were successfully mining more than 7 Bcm of gas contracts when this whole project was just an idea on paper. Today, we are few months ahead of first gas and we will be a lot more confident when we approach markets and able to make more commitment. And also, a very important point people are reporting. We read in the press that selling gas to Egypt at more than $5 an MMBtu. It's going to be very difficult to say no to a higher gas price for the volumes that we will have available. And there is infrastructure later we can access. So I don't want to say that I would like to see the contract canceled. But if it does get canceled, I think we're going to be in a much better position than the one we are in today.

And I guess just on the incentivization.

On the incentivization payment, this is a one-off. SCM has publicly stated that they were looking to bring people from outside Singapore and they were looking to share this cost with their customers. And understanding the difficulties that the shipyard has gone through and in the interest of our relationship with them, we agreed to participate in that scheme. This is a one-off payment that covers the additional resource that we have seen and will stay until sail away.

And we might not pay the full $12 million. It's not a $12 million that we hand over and they do their best. It's based on the number of additional staff from China and Malaysia that they bring in. And if we don't need them because there are more staff coming available from the normal markets, which there are, because restrictions are lifting in Singapore. Singapore is doing a fantastic job of vaccinating people. So more people are coming into Singapore. We've actually got about 81 of these people falling under the incentivization scheme. And that could rise to 250. If it rises to 250, we paid the $12 million, but we might not need that. So you shouldn't take it in cycle. We just handed over $12 million of cash. This is actually a staged payment, and it's -- we view it as the maximum that we would pay.

Understood. That's helpful. And just 1 very quick additional one, if possible. Just on the CCS project in Prinos. I appreciate it's very early stage. But just wondering if you've got any initial view on what the capacity of that might be in terms of -- or is it too early for that?

No, no, no. It's -- as Matthaios said, we've raised funds for this through the RRF initiative of the European Union. The idea is by the end of 2025, we have in place a system that can sequest up to 2 million tonnes per year of CO2. The eventual capacity we expect of the area. So looking out beyond just the Prinos and Epsilon fields. But the other structures and aquifers in the area, we believe we can take it to about 5 million to 6 million tonnes a year, but we can't do that within the time frame of the RRF fund, which is only funding projects which are completed. So we had to phase the overall project. So yes, 1 million to 2 million, I would say, 2 million. Obviously, the capacity would be there of 2 million by 2025. Whether there is 2 million of CO2 captured in Greece and coming via ships or pipelines to the facility by that time is another matter.

Our next question comes from the line of Werner Riding from Peel Hunt.

A question on the incentivization payment at Karish beyond that really. What -- I mean that's obviously clearly worked by increasing manpower in the short term. But could you please expand on what the future potential acceleration measures are that you referred to in the statement this morning to ensure that Karish remains on track?

Should I answer that? Yes, okay. I mean, we're not only obviously focused on what's going on in Singapore. Singapore is now an important -- still an important part of the project. But equally, the tow coming through the Suez Canal and the 3 months in Israel are equally important. So the team is working on all elements. The key uncertainty in Singapore at the moment is, of course, as I said earlier, I think to Nathan's question, it's not just about total numbers. You can't sit there and come up with some magical algorithm that puts in 1,800 and tells you the end date, it's about the skill mix. And obviously, as you're coming towards an end of the project, you're winding the number of staff down. So we're very focused on getting to what we call mechanical completion of the haul. So it is classified and flagged and it can sail. We can do the sea trials. We can show that it's ready for its journey. We then have to actually make sure that we've done enough of the work that we don't move complex work offshore because that's the last thing on the earth that we want to do is to make the hook up and commissioning harder by moving the boat to early. We've also, as mentioned, we've got these 2 growth projects that we're undertaking to increase the capacity of the oil system and the gas system. We have to make sure we do the right amount of that work while we're in Singapore. So this is quite a complex exercise to go through, will be completed in about 2 to 3 weeks' time. And that will give us a very firm idea of whether we should stay until the 28th of February or it's best to actually bring it forward. It could be before the end of the year, it could sail away. But we have to do that in a way that makes sure that it doesn't extend the overall process. So it's a fine balance. We're working with Technip, working with Sembcorp. We're working with the additional contractors that will come in when we're doing the commissioning. We're working with the other part of Technip that -- we'll do the hookup and the mooring. When that work is finished, we will know. But everything keeps pointing to the fact that it's not going to slip further backwards. It's more likely to come forward, but we need to complete the work before we say what that date will be.

Next question comes from the line of Rachel Fletcher from Morgan Stanley.

I actually have only 1 left. Just on the dividend. I know you said that the future dividend policy is to be declared in due course. I think the previous guidance for the inaugural dividend payment was, I think, 2022. I just wanted to understand whether that's still likely. And also what kind of metrics or factors the dividend might be linked to, for example, is it linked to the startup of Karish?

Well, I will let Panos answer the question. But before he takes it. Clearly, the start date of the Karish project plays a major role. And once that is further defined, we will be able to be a lot more clear on when the first dividend will be paid. As a shareholder in the company and today being the largest shareholder in the company, I'm obviously very focused on making sure that dividends are paid. And that is something that we have clearly communicated to the market that this company on the strength of the long-term gas contracts has the certainty of cash flow to declare dividends. We obviously don't want to do it too early because we don't want to take any liquidity risks. But once we are clear on the actual date, and as Steve said, most likely, it's going to be sooner rather than later on the guidance we've given today, we will be able to make firm commitments on the date. So the answer to your question, Rachel is, yes, we are aiming for a dividend in 2022. That is the plan. The matrix will be defined. And the details will be announced as we said in due course because we are not ready to go into details right now. But we're clearly focused on returning money.

I think Matthaios covered the concept here. If I were to summarize the key milestones we have set to ourselves at the beginning of the year. One was to rationalize and optimize our capital structure. I think we achieved that with an extremely high mark. And the second one is the milestone of achieving first gas in Karish. The second one, as explained by Steve and Matthaios, is well on track for first half of 2022. So I think 2022 guidance, as Matthaios mentioned, is still valid but the policy itself, we have set ourselves to communicate it more clearly as we get closer to that date.

Our next question comes from the line of Matt Smith from Bank of America.

I think my questions have been well covered really. So could I just ask 1 final confirmation on Karish and your contract with Technip just outside of the potential acceleration measures that you're still very comfortable in terms of your fixed price contract there. And I suppose confirmation that it's not just your confidence in that position, but I suppose you and Technip are on the same page on that despite a lot of the cost inflations that we're seeing all across sectors at the moment.

Well, Matt, the contract that we have with Technip is a turnkey EPCIC contract that has a fixed price. So Technip is hugely incentivized to finish early because they're not going to get paid more if the project takes longer. So we are totally aligned with them. Same with the shipyard. The shipyard wants the FPSO out because it's -- they make money out of using their docks and their space, and they're also incentivized to get FPSO out. Last but obviously very important for both of us, Technip and us, is that there are LDs. If there is a delay that are payable under the contract that Technip would be paying to us. So the statement that we're making today is fully aligned with what Technip believes. And when we come out with any updates, obviously, it will be reflected also through the agreement we have with Technip. So I repeat what I said, we are totally aligned contractor or a subcontractor because we're all on the same side here when we want the project finished as soon as possible.

And we have a question coming from the line of Al Stanton from RBC.

I just want to ask about the net zero targets, please. Obviously, I see the reduction in the carbon intensity, but that's offset by huge growth in production. And then obviously, the carbon capture project, that's about reducing other people's emissions. And then as you talked about the gas sales contract being long-term fixed price contracts, there's no incentive to rebrand your gas, it's carbon neutral. So I'm wondering what there is in addition to what you lay out on Slide 7 as to what you're doing to perhaps accelerate the reduction in your absolute emissions and achieve your 2050 target a little bit sooner?

It's a very good question, Al and we are not the type of company that is going to go out and buy offsets and pretend that we are selling green hydrocarbons. That's not what this is all about. And this is something that we could do. The cost would be fairly small and that you can even pay a few euros today to buy a green airline ticket. So that's not what this is all about. As you can see from Slide 7, a lot of our emissions come from the old facilities of Prinos, which we are reducing actively taking measures, buying green electricity. We are looking at a project to capture the CO2 emissions of Prinos and reinject them into the field that will enhance the recovery of the field as well.

Ahead of the CCS.

Yes, regardless of the CCS. This is a stand-alone project that would bring the Prinos Scope 1 emissions down to 0, bringing Israel on stream. The FPSO is one of the newest machines in the world and one of the most efficient ones in terms of emissions, and we're designing it together with Technip to be as efficient as possible. Obviously, there's a limit below which you cannot move, especially in Israel because there is going to be emissions that we can't capture or sequester in Israel. And we will be looking through the CCS projects not only in Greece in other parts of the Mediterranean. And that could be also Israel and Egypt to get to the target ahead of plan. And our sequestration, CO2 sequestration projects are not only for third parties that will be injecting their CO2 they're going to be about our CO2 as well. And it is very interesting for us that we see European Union funding available today to fund these types of projects so that we don't have virtually any or very limited impact on our liquidity or capital needs. The same is now starting to happen also in Israel and Egypt. Obviously, Italy and Greece from our portfolio are well ahead of Israel and Egypt, but we are already starting to hear a lot of discussion about projects that can bring emissions down to 0. So this is not about carbon neutrality. This is about actually getting to net zero. We've set it as a target. You see the progress. We will continue to make progress, 7 kilos per barrel are numbers well below industry average, and we will continue to get there. Do I have all the answers? No, I don't. And we've set the plan, we've set the strategy and the vision and we are continuing to use science-based targets. We are reporting and being very transparent under our CDP, the Carbon Disclosure Project. And we are reporting everything openly because we believe that only by being transparent and third parties auditing our numbers, we can push ourselves and the industry to get to the target.

We appear to have no further question at this point. I hand the conference back to you.

Thank you all for participating. Thank you for the interesting and challenging questions. I repeat what I said before, we've seen a step change from the Epsilon acquisition. Energean is a very different company today. This is not just about the project in Israel. The project in Israel is going extremely well at the moment, despite the challenges. Our production across the portfolio is ahead of plan. We have great growth projects. And as I've said many times, we are focused completely and totally on being leaders in our net zero commitments and being leaders in the sustainability side as well. So thank you for participating. Thank you for covering us. The analyst, thank you for supporting us, our investors, and thank you for buying our gas, to our buyers. Most importantly, thank you to all the Energean team that is performing exceptionally well in the first 6 months, and we will continue to do so over the next 6 months of the year.

Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect your lines. Thank you.