Energean plc (ENOG) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to Energean's January Trading Update Conference Call. [Operator Instructions]. I must advise you that this conference is being recorded today. I would now like to hand the conference to your speaker today, Matthaios Rigas, Chief Executive. Please go ahead.

Good morning everyone, and thank you for joining our call today. I'm joined by Panos Benos, our CFO; Steve Moore, our Technical Director; Nick Witney, our Commercial Director; and Maria Martin, our Head of Corporate Finance, who will all be available to answer any calls you may have later. It's a great pleasure to report today a record year for Energean. 2021 has been a fantastic year for us with record financial results, solid performance from our existing assets, assets that primarily we bought from Edison, the performance of our Egyptian Abu Qir field, our Italian portfolio, complemented obviously by the solid gas price that we've seen in Europe, resulted in a 50% increase in revenues and a 90% increase in EBITDAX year-on-year. I know that everybody is keen to know what's happening with our project in Israel. The key message is that we are on track, as we've reported before, for sail-away this quarter, with first gas in Q3 of 2022. No change to the schedule that we've reported on before, and on track to achieve our target, our medium-term target of 200,000 barrels of oil equivalent a day when all our projects are on stream over the next 18 to 24 months. But beyond that, Energean is not just about the existing assets, it's not just about the Karish project that is coming onstream in 2022. We have a very ambitious 5-well drilling program that is commencing in March 2022. The rig is already contracted. It's getting ready to move, and we're targeting 1 billion barrels of oil equivalent prospective resources, always focused on gas in Israel, and we are extremely excited to see the gas market developing in the region that justifies not only drilling those wells, but developing the projects that would bring gas to the local market in Israel and the regional markets around us. All that is underpinned by a very robust capital structure with over $1 billion of liquidity. We took advantage of market conditions in 2021 and raised $3 billion of bonds to refinance all our debt. We'll come back to that later. And now, we're getting close to the time where money will be returned to our shareholders through a dividend policy that we are planning to announce together with our annual results in March 2022. Of course, ESG and our leadership position is something that we're totally focused on. It is not what everybody is talking about right now since we have been leading our sector to commit to a net 0 target by 2050. We are continuously reducing our carbon intensity. Our target next year is to be at around 13 kilos of CO2 per barrel, continuing our plan to be industry leaders in CO2 emissions. But in parallel, we're also maturing Carbon Capture and Storage projects in Greece and the rest of our portfolio. Those are the key messages from today's presentation. I would like to go to Page 4 of the presentation and just look at some of the key results that Panos will also be talking about. Our production averaged 41,000 barrels, 72% of that was gas, above our initial guidance. We talked about -- and I talked about increase in revenues and EBITDAX, close to $500 million of revenue and $200 million of EBITDAX. All of that from -- primarily from the portfolio of Edison. I remind everyone, we bought Edison's E&P business for $250 million. We've already generated $200 million of that from that portfolio. But most importantly, a lot of our investors were worried about receivables from Egypt. Well, our receivables' net position as of 31st of December was sitting at $92 million when we started at $222 million when we took over Edison. This is a record performance, and I think the Edison team had never seen these types of reduction of receivables from Egypt. We are very pleased, obviously, with our position in the country, and we are continuing our efforts to grow our business in Egypt. We achieved the full integration of Edison E&P during 2021, and we are working now as one team to continue the growth of Energean. We raised $3 billion, as I mentioned earlier, and in addition to that, we've signed a $100 million state-backed loan to continue our developments in Greece. We completed the acquisition of Kerogen's 30% interest in our Energean Israel business, and we're now the holders and owners of 100% of a fantastic portfolio of assets, which are fully funded and give us the ability to continue to grow. Our growth will come from not only the Karish development and the projects that we've announced, we will be talking about those later today. The 5 wells that are coming up next year have a potential to double the resource base of this company. I mentioned about the market, we'll come back to market as well. We see huge demand not only from Israel, but also from Egypt, Jordan, export routes, Europe, with the phenomenal gas prices that we're seeing in Europe today, there is continuous effort to try to make the East Med the alternative source of gas for the European Union. We are long gas in a market that needs gas. That has been our strategy, and that strategy is paying off today with great demand from all the markets that we're targeting. Our carbon intensity, as I mentioned earlier, is reducing continuously. We've achieved in 2021 a 19% decrease versus 2020 levels. We've rolled out green electricity from all operated sites in Israel, Greece and Italy. We have a zero-routine-flaring activity, and all of that was recognized with an award as Best ESG Energy Growth Strategy in Europe, for which we are very proud of. I'll focus on that -- I'm going to Slide 5 of the presentation. And I know that, as I said earlier, this is not the first topic it used to be last year. People are focusing now on energy costs and supply of gas in Europe, that's the #1 topic, but we are continuously reducing our carbon intensity. I'll keep repeating that this is our license to operate. Double A rating by MSCI, Gold level by Maala Index in Israel. We've started our Carbon Disclosure Project with a rating of B up from the B- last year. Awards all over Europe, and we're targeting to reach 7 kilos of CO2 per barrel of oil produced. This is going to be our focus, and through the CCS project in Greece, for which we have entered the pre-FEED stage, we are maturing the project. It's included for funding in the recovery in resilient fund of Greece, so we will be getting money from the European Union to support our efforts there. We look to become the first E&P company to target and reach a net-zero position faster than what we originally announced. With that, I would like to pass on to Panos to take you through more details on our numbers and our medium -- short and medium-term guidance.

Good morning from me, everyone. As mentioned by Matthaios and was clearly shown from the summary results, Energean had a record year in 2021 driven by the high productivity of our producing assets, which meant we were well-placed to take advantage of the recovering commodity prices, especially European gas prices. For 2022, our guidance is production at around 60,000 to 70,000 barrels of oil equivalent from 41,000 delivered in 2021. This includes the expected production from our Israeli assets in the second half of 2022. Cost of production increasing to $360 million to $390 million, again driven by the introduction of our Israeli asset into our producing assets. I remind you at cost of production, we include the royalties. Development CapEx at around $700 million. That includes the underspend in 2021 of around $100 million, $150 million. Includes $150 million deferral opportunity we have under the EPCIC contract with Technip to be paid from gas revenues in the 2 to 3 years post -- first gas, as well as $150 million linked to the second phase of our Karish development and Karish North tiebacks, all of them to incur after first gas. In terms of exploration expenditure, we increased that $100 million, driven by our drilling campaign announced in Israel. In 2021, we spent $54 million in line with initial guidance and driven by our Glengorm appraisal drilling in the U.K. In terms of decommissioning, we are budgeting around $20 million, split between U.K. and Italy. I want to flag that this is a number that we have understood repeatedly in the last few years. We had guided last year a similar number, but we spent $4 million. This is because of our technical team being able to extend the life of mature assets, and most importantly, find ways to defer the decommissioning expenditure. Consolidated net debt as of end of the year was sitting at around $2 billion at a lower range fiscal guidance of $2 billion to $2.2 billion. We expect our peak net debt position to be end of next year after only a few months of production from our Israeli project. Our medium-term targets remain the same. We expect that to be achieved after we have completed Phase 2 of our Israel project, that means the Karish North tieback, and of course, having Cassiopea asset online. All those are expected to be fully operational in 2024. Our key metrics of 200,000 barrels of oil equivalent of production EBITDA just below $1.5 billion, assuming oil prices of around $65 and net debt well below 1.5x EBITDA on a consolidated basis. Moving to next page. And as Matthaios mentioned, from a capital structure perspective, 2021 proved a great opportunity to optimize our debt profile given the strength in global credit markets. We topped the boat markets twice in March for $2.5 billion project bond for our Israeli development, which delivered an average life of 6 years, with the first tranche maturing in 2024 and the last in 2031. In October, we issued our first corporate bond sized at $450 million with maturity in 2027. Finally, in December, we signed a EUR 100 million project financing with Black Sea Trade and Development Bank for the development of our Epsilon oilfield in Greece with a maturity in 2029. As a result, and you can see at the schematic, we now have a liquidity in excess of $1 billion, average debt life of 6 years, with our first debt repayment schedule for 2024, and a blended cost of debt below 5.5% and close to 0 exposure to any interest rate movements. Moving to Slide 9. We have tried here to emphasize that the majority of our net debt position sits in ring-fenced, non-restructure -- non-recourse debt structures. And specifically, our Israeli bonds to be serviced from long-term contracted gas revenues and our Epsilon project financing of EUR 100 million to be serviced from oil production from Greece. The rest of the group, whose assets have delivered in excess of $200 million EBITDA in 2021 and mainly driven by Italian and Egyptian production, sit at a very low leverage position, as you can see, with a net debt of only $100 million. I'll finish -- I'll close the financial section with a familiar slide for those that have been following our presentations. We have now optimized our debt profile. We are a few months away from our major milestone of first gas in Israel. And of course, we are enjoying a strong liquidity position, able to fund all our sanction projects and exploration drilling for the next months. In a few weeks, as Matthaios mentioned, we will finalize and clearly communicate alongside our annual results a clear and credible dividend policy that, we want to believe it's going to be a sector-leading one, that will deliver what we have said from the very beginning, robust returns and reliable returns to our shareholders. Matthaios, back to you.

Thank you, Panos. I would like to ask Steve Moore, our Technical Director, to take you through updates on our projects.

Thank you. Good morning, thank you, Matthaios. Yes, I'll take you through the project in Israel, then we'll move on and we'll look at the projects, the other main projects we're doing around the portfolio. Obviously, the Israeli project is key on everybody's mind. We've had a good year in '21 compared to the '20 performance, where we were heavily impacted by COVID. We -- in Israel -- sorry, in Singapore at the moment, the FPSO is reaching completion. We erected the flare and re -- de-erected it just to test -- test the system will work, which is the main final milestone, main mechanical milestone that we had to do. That was done just before Christmas. I can report that the tugs have arrived in Singapore and they've been certified, ready for the towaway, which we expect in the first quarter. So we should be leaving Singapore before the end of quarter. We have to make a brief stop in Singapore in a dry dock facility to remove marine growth so that we can pass into the Mediterranean, and then into Israel without bringing any invasive species. Following sail-away, we look at a period of between 4 and 5 months, including the tow, which will bring us through to around the middle of August when we will introduce gas. Gas will be first introduced from the pipeline. We'll bring gas from Israel to the vessel. We'll do the final commissioning on the gas turbines, generating our own power. And with power onboard, we can then open the wells. The project in Israel itself is complete. The pipeline is finished, the wells are drilled, and so everything is ready to go. If we move on to Slide 13. Not only are we focusing this year on finishing the main project off because we've been so successful at firstly finding additional gas volumes in Karish North. If you remember, we drilled and appraised -- explored and appraised Karish North in 2019. We sanctioned that development at the end of last year and -- or end of 2020, actually, or early 2021. Focus is then -- we're getting ready to hook that well up in 2023. This involves us re-entering the exploration well, which became an appraisal well and will now become a development well, so reusing that asset for 3 functions. We will do that in the second quarter of 2022, and then we will lay early next year the pipeline to connect the well or the new well manifold back to the Karish Main manifold. We're going to take the opportunity in parallel to add a second riser. If you remember, we sanctioned the project on the basis of a gas sales quantity limited by only having one sales gas riser. Now that we found Karish North and Nick Witney has been able to sell enough gas contracts to almost fully fill the FPSO. We will take the step of installing at the same time as Karish North, the second riser. This optimizes the costs associated with that project. And of course, what I'm going to then talk a little about is the growth drilling program that we're going to execute in parallel. Please flip to Slide 14. It's quite a busy slide. It's not only looking at what the program is for 2022, but obviously, what we would do with the additional volumes of gas and oil that we hope to find in 2022. There's no point in going out and finding new volumes if we don't know how to commercialize those volumes as quickly as possible. So one of the things that we've been doing in 2021 is early studies, conceptual feasibility studies, looking at how we would develop discoveries, whether they be in Block 12, with the Athena well in Block 31, with Hermes, or 23, a very exciting well, which would be the first well to really test the deeper potential in the [ Levantine ] basin. I think people will know that Noble have tried to do this and failed. We hope to set the record straight and as we reach either the Cretaceous or the Jurassic in this interesting location. 5 wells, we've permitted -- we've planned and permitted. 3 are firmly in the program, including -- it's really almost 4 wells because in the KM-04 area where we found a lot of additional liquids during the development drilling, we will drill also a pilot hole from the KM-04 well, a little bit like Karish North, try to use the same well to do multiple activities to reduce the cost. That will put a well in the only [ undrilled 12th ] block within the Karish Main field. We start with gas in Athena. Athena is not the biggest structure that we have, but it's very strategic. Basically, it will drill at the far end of what is a mega accumulation that embraces Tanin and all the structures in Block 12. It's -- It's the tail on the Leviathan Whale heading between Leviathan [Technical Difficulty] and discovery at Tanin. if we drill a new discovery well in Athena, we've effectively de-risked around 100 to 120 Bcm of gas in the whole structure. We then move on and we try -- we have a very complex -- not complex to drill, but complex in terms of all the targets it's hitting in KM-04, where we hit shallow gas right down to deep targets and appraise the potential oil in that the KM-03 results indicate could well be present. We then go on and do a relatively routine piece of work. We go to Karish North, we sidetrack it and we -- we installed the completion ready for start-up in 2023. Depending on the results of those wells and depending, obviously, on getting the gas flowing from Karish, we may move on and drill Hermes. It's another gas well opening up a new cluster of prospects sitting between the discovered Tamar and Dalit accumulations. And then finally, in the sequence, which will bring us through to the end of the year, will be Hercules. This is gas in the shallow horizons. Very, very nice amplitude anomalies, flat spots in the Miocene, but very large structure in the Cretaceous and the Jurassic, where we would expect to find more oil or liquids-rich fluids. Next slide, please.

Nick, would you like to cover our commercial position, please?

Certainly, Matthaios. Good morning, everyone. As we have emphasized, the Israeli project has been, from a marketing point of view, very, very successful. We have contracted all of our existing resource and reserve base under long-term agreements. We've largely -- with largely take or pay or in some cases, an exclusive supply arrangement and floor prices, which underpins the economics of Israel development. Although the project has been delayed by COVID, as we've discussed, we still have all of our customers under contract. We are handling commercial discussions with a number of them. But as of yet, all of our gas remains contracted. The market interest, with the much higher global gas prices we've seen this year compared to last year, has been extremely encouraging in terms of following on from the success, which we expect in the wells that Steve has just described. We have around about an additional 1 Bcm, 100 million standard cubic feet [ per capacity ], potentially available in the FPSO, and we are engaged in discussions with regional buyers as well as Israeli buyers, state and private entities. As it says in the final bullet point, we have signed an MOU with EGAS, the Egyptian State Gas Company, and as I said, also discussed with a number of other parties. So the market outlook is very strong, and we hope that, that combined with the drilling campaign that we completed this year, we'll set the foundations for a further expansion development as we've shown on Steve's schematic. So we expect a very strong performance on those -- that side of the gas business. On the oil business, which isn't mentioned in the chart, we are close to concluding a marketing arrangement and logistics arrangement with a major trading desk, which will help us to commercialize the liquids, and we completed early technical pre-marketing work on that, on the assays, and we're very confident that we have a very valuable light crude that -- light crude [ stroke condensate ]. So we're looking forward to an excellent performance in the latter part of 2022 in both the gas and the oil.

Okay. Back to -- sorry, Nick, are you finished?

I'm finished. Yes. Thanks.

Yes. Okay. So let's switch to Slide 17, please. We just quickly look at the other projects, the Egyptian, Italian and Greek projects. This just summarizes Egypt. We're on track to bring on stream the first gas from the NEA/NI development in the second half of 2022 and then bring it up to full production, which is around 15,000 to 16,000 boe per day equivalent by the middle of '23. In parallel, what we've been doing is screening all of the potential other opportunities in our portfolio in Egypt. We found lots and lots of things which have been overlooked for years by Edison. And hopefully, over the 2022 period, we'll be maturing subsequent projects to allow us to keep production in Abu Qir up around the 40,000 barrels a day level. We go to Slide 18. In Italy, very similar story. One large project working with ENI, in this case, as the operator. Cassiopea develops the Argo-Cassiopea and some other smaller satellite fields offshore Sicily. First gas is targeted for 2024 project remains on track. Also in Italy, we are going through the portfolio. There's many, many fields in Italy that we've inherited. And what we're finding is a large range of upside opportunities, both onshore and offshore, that we're working either with ourselves as the operator or with ENI to try to mature into further projects to maintain the -- maintain production, and indeed, even grow production in Italy. We go -- skip to Greece. We've been talking about Epsilon. We've managed to refinance Epsilon. Project has kicked off again. The actual land platform, the structure, will be installed in a couple of months' time, early spring here in Greece. We've got the pipelines in over the summer, and we should kick off and complete the 3 wells we've already drilled into the reservoir and hook them up in January, February 2023 for production a few weeks after the drilling is complete. As Matthaios mentioned, we're also focused on developing this -- the CCS project that we've got funding for. We are using wood as the pre-FEED contractor. We kicked that off this week. We're in the process of awarding a similar contract for the subsurface work. In parallel, we're working up our innovative way of producing very green or very blue, almost green hydrogen, with almost 100% recovery of the CO2, which we're also seeking funding through the European IPCEI project mechanisms.

So with that, allow me to close the presentation today, highlighting what are the key milestones that we're looking to achieve in 2022. Clearly, the FPSO sail-away and first gas from Karish is our top priority and key focus, and as Steve mentioned, we are on track to deliver gas as per the schedule we've announced previously. Our exciting 5-well program in Israel could double the resource base of the company and give us an opportunity to continue selling gas at East Med, so these are announcements to look out for over the next months. In Egypt, continuing the production from Abu Qir and bringing on stream NEA/NI is a key target and a key milestone for us. Undoubtedly, our dividend policy and rewarding our loyal shareholders that have been supporting us, and we are very thankful for all the support all these years, is a key target for us. And last but not least, moving our mature oilfield in Greece, Italy and other places in the portfolio, turning them into Carbon Capture and Storage projects and Eco-Hydrogen projects is the future for our non-Israel and Egypt business, and that is going to be a big focus for us going forward as well to secure a future for Energean. Not only from our gas business, which is underpinned by long-term gas contracts and stable and predictable cash flows, but continue the growth of the business. The growth that we've delivered starting from 2007 when we were a very small company with just one asset in Greece, to what is today a $200,000 -- 200,000-barrel company, with more than 1 billion barrels of resources and an exciting growth always focused in the East Mediterranean and the wider Mediterranean region, which is the area that we know well. We know the rocks, we know the geopolitics, and we understand how to monetize projects quickly and adding value to our shareholders with deals like the ones we've done with Edison, which, I repeat what I said before, has proven to be a fantastic deal for us just in the first year of operation. We've basically got all our money back through the reduction of receivables and the EBITDA performance of the asset. These are the types of value-accretive deals that we bring to our shareholders, and 2022 is going to be a big transformational year for us. We look forward to having all our shareholders and new ones in our register and continuing the growth of business. Thank you for your attention today. Thank you for participating, and I would like to open the floor for any questions you may have.

[Operator Instructions]. Your first question today comes from the line of David Round from Stifel.

Thanks for the presentation. Can I start to just ask about the gas buyer transition period and the visibility you have over that period? I mean, it feels like there's quite an incentive for buyers to move across quite quickly. But are there contractual milestones within or even at the end of that 12-month ramp-up period that you talk about?

Yes, I will take this one Matthaios. Yes. So the transition period does not affect all of -- or is not required to all of our buyers, primarily the IPPs that we signed in the first tranche prior to FID. Most of them, the mechanism will be -- is backed by regulation, but will be governed by the contracts they [ already ] have with their existing supplier, and has been in the beginning called for a 12-month notice period. Some of our suppliers manage -- have made other arrangements or may be capable of making other arrangements than some of our customers say. And they're also not restricted from what date they can give that notice. We have discussions with buyers from time to time about the balance of risk in terms of project completion, and some are considering the date at which they could serve their notice so they can, as you say, take advantage of the lower price we'll move on to from an earlier point as possible. The balance that they have to manage is their obligation to their existing supplier in terms of any take-or-pay or makeup banks that they might have accrued. So as you say, we expect from the minute we start producing gas into the system to have very strong demand for that. And we see that the ramp-up picture that we present is -- is sensible, but could well be exceeded.

Okay. Great. And they just maybe...

Not within our control, of course. So that's obviously why there's not a great deal or more detail about that.

Yes, understood. Another one, just then on decommissioning, and you mentioned in the presentation that you were undershooting. There were some numbers and forecast that you guys put out a while ago. I'm just wondering, could you elaborate on how your expectations have changed versus those numbers that you put out originally, and clarify maybe how much is deferral versus actual savings, please?

I'll take that. The commissioning, as you know, it's never -- it's always deferral, right? We cannot make decommissioning disappear. We are working, however, as mentioned, in opportunities to change any decommissioning commitments into projects like the CCS and stuff like that. But for the time being, this is driven by better performance from mature assets in Italy, that means that we keep them into production longer than what we expected. As a point of reference, our initial guidance in 2021 was for numbers around $30 million in decommissioning, and we recorded only $4 million. That is driven almost exclusively from Italian deferral of decommissioning. Now, has that moved all in 2022? No. That's why we're guiding $20 million for 2022. And if a number is going to change very fast, meaning as soon as the next annual results, I expect this number to go even further down, especially if we continue seeing the strength in commodity prices.

Your next question comes from the line of Nathan Piper from Investec.

A few questions from me, mainly around gas contracts, please. So first of all, can you confirm that the gas contract situation is going to be resolved before first gas? I guess, I'm referring specifically to things that are going on with Dalia and potential contracting of those volumes with the [ East Hagit ] winners? And secondly, can you give us a bit of a picture on the on the existing infrastructure that you're able to access for exports, so what kind of volumes could you send to Jordan or Egypt, given the existing infrastructure, and are there any challenges accessing that? And then I guess lastly, given all of the drilling that you've got coming up, including some pretty material exploration prospects if you take those options, would these create material CapEx events that could then impact what you might do around the dividend? Or I guess, how do you reconcile gross CapEx with dividends?

Nick, I will let you take the question on gas contracts. Let me start with the last point that Nathan made. To be absolutely clear to everyone, our total focus is to have a stable and partnership sector-leading dividend from our projects. I remind also everyone that today, we are 100% owners of everything we do in Israel. We don't have to have 100% ownership of future projects. We chose to develop Karish and Tanin because it was a fantastic opportunity owning 100%. We chose to drill the wells because we believe that there are opportunities out there with a very high probability of success. But if there is a next development phase, and of course, as you rightly point out, Nathan, to develop the prospects that Steve mentioned, there will need to be additional CapEx. That will be done together with partners. We will not continue 100% on all those projects. Nobody does it, not even the majors, so we will share risks and there are -- and we've proven that we know how to raise funds even in the most tough times, but dividend policy will be preserved and it will not be deferred. And you all know that I am today a large shareholder of the company, and we are totally aligned with shareholders to return money back to shareholders and not become a never-ending investment story. I've made that clear every time I've spoken to shareholders, I'm repeating it today. We are going to be looking after our shareholders. And of course, in parallel, we will look to grow by taking advantage of other policies rather than being 100% on the major project. On gas contracts and gas infrastructure, Nick will comment. I will just make a general statement here that we were able to sign 7 Bcm of gas contracts when this project was just a PowerPoint presentation and contracts that have just been signed. So we penetrated the Israeli market and took away from the competition 7 Bcm. Right now, we are a few months away from first gas, and we are in the middle of a market that needs gas. I was in Egypt a couple of weeks ago, and you saw in the presentation that we signed an MOU with EGAS. Egypt needs gas, Egypt will need more gas going forward. Same with the rest of the Mediterranean. Greece needs more gas because of the high gas prices that we're seeing today in Europe, they're trying to diversify away from their existing suppliers. Jordan, the same. So beyond what we have in Israel, and Nick will talk about Hagit and the infrastructure. We have a very wide market that we can access. So even if Dalia doesn't end up being our customer, we have so much demand out there that have no worries that we'll be able to fill up the FPSO, either through long-term contracts in Israel or other places. Nick, on to you for specifics on the gas contract situation and infrastructure.

Okay. Thanks, Matthaios. Nathan, obviously, we -- what I can say about any specific customer and any specific process is limited. Obviously, the dispute -- the contracts have dispute regulation provisions, which obviously include arbitration, and obviously, are governed by Israeli law. As I said it before, all of our contracts remain on foot. We are continually in commercial discussions with all of our off-takers understanding their needs and wants. And obviously, driving things to keep our customers happy, but in the best interest of our shareholders. So it's possible that the Dalia situation won't be resolved before first gas as the process takes its course. Obviously, we are managing that risk. As I said, we would value where our first customers signed. We very much like them to stay with us. We don't believe that the way that they've gone about their business lately is correct, hence the dispute, so we are continuing to maintain communications as well as going through the process there. In terms of where that leaves us, I think, probably is a bit of a segue to the Hagit and exports question. We're seeing extremely, extremely, as I said, strong demand from the regional markets, given the current very high prices. You only have a little bit differential between prices that we report our average selling prices in Israel and prices in Europe currently on the forward curve. Egypt, obviously, is linked to those markets through LNG, and Jordan is also linked to LNG and Matthaios has mentioned Greece, which is looking to follow Israel in reducing its dependence on coal. So the demand picture is very strong. Customers are very keen. I don't necessarily want to be uncontracted. I want our long-term contracts customers to keep the faith [indiscernible] when we first arrived and offered competition that has brought most Israeli gas prices down to such low levels. With regards to your second question on infrastructure. You might have seen in the press yesterday that INGL, the Israeli transmission operator, has stated that it's in discussions with Karish and Tanin, Leviathan and Tamar about using the remaining capacity in the Northern Link through the Jordan Valley. And there's a pipeline connecting already, which [indiscernible] is already exporting through. There is further capacity in that pipeline without significant further investment, so those arrangements or those discussions are ongoing. There is quite a lot of capacity already in place that can take gas from north to south in Jordan, take it to the Egyptian border. That could be further increased with further compression work, so I understand that the maximum possible throughput of that line is 10 Bcm a year. So a significant possibility of moving gas the long way around as it were. And you're aware also probably that INGL has started to process expressions of interest in another onshore link for the South, and we ourselves are looking at other things that we might promote to improve the regional transmission links. So the picture is good. In the short term, there is [ ullage ] available, capacity available for us to move the balance of the Karish capacity subject to discoveries in Block 12 and onwards into Egypt through Jordan. So it's a good market picture. The infrastructure is in place. Obviously, various parties are staking their claims or trying to stake their claims to those capacity [ rates ].

Yes, that was pretty comprehensive.

[Operator Instructions]. Your question comes from the line of Mark Wilson from Jefferies.

I'd like to ask on the oil sales contract for associated liquids from Karish. Forgive me if I've missed details on that, but just what should we expect for that to be announced? And also, how important is that as related to the first gas timings that you spoke about introducing gas into the turbines, et cetera?

Okay. On the oil side, we -- it's a little bit in terms of maturing the commercial process behind the gas because what we needed, really, put things off were the well test results that we did last year. So we run with the well test samples, we've run a series of new assays and started to engage with the oil markets. We are going to go into an arrangement, or we intend to enter into an arrangement, whereby we have an early limited marketing period of a number of cargoes necessary to establish the value of this new crude in the market. I say crude, we described it as condensate or likely that the oil has a number of characteristics which, well, as I think Steve has described in terms of finding oil in Karish, means that the compositions are slightly different. But on the basis of the work we've done so far on the static samples, and obviously, we won't be able to exactly establish what Karish blend is until we start producing it through the processing equipment on the FPSO. But the work we've done so far leads us to believe that the closest analog to what we will produce is the same as Aasgard Blend, which is an existing light crude, heavy condensate, marketed from the North Sea. So we have at the least that we can approach subject to, obviously, logistic differentials. We can approach the prices of that blend, if not better. That will be our target. So we will be entering into an arrangement, as I say, with a partner. That partner will bring their expertise to assist us in launching that crude into the world markets. And then after the end of that period, we will examine where we are and see whether we go completely free and just trade cargo by cargo, as we do in Italy, or whether we enter into a long-term management with a refinery or an off-taker. So that obviously is going to happen between now and first gas. And obviously following first gas, depending on the production levels, we will be ready to lift our first cargo a month or 2 following first gas. And then that will be -- will make its way to market.

Okay. Understood. That sounds just fine, and therefore, just a few months after you just introduced into tanks on the FPSO, so there's no impact on first gas.

Yes, exactly.

[Operator Instructions]. There are currently no further questions. I will hand the call back. Sorry, sir. We've just had one more question come in. Are you happy to take it?

Yes, of course.

Your next question comes from Ashley [indiscernible], no company stated.

It's Ashley Kelty at Panmure Gordon. Just a quick query about, obviously, the U.K. portfolio. You may have mentioned that you're looking at maybe disposing of that, I'm guessing that's probably after the duster at Glengorm. What -- are you able to say for the reasons for the result of that was -- was it sort of reservoir or no hydrocarbons, and also sort of whether you will keep the U.K. portfolio or whether you're just looking to run that down and dispose of that?

Let me take the question on Glengorm. I will talk about the portfolio, and Matthaios can talk about that. But just the -- We're still working with the operator of the Glengorm 2 appraisal wells. I can tell you that the southern well, well, we found traces of hydrocarbons. It didn't find reservoir in the -- at the right depth. So it was like a reservoir. Then the central well found conversely fantastic reservoir, in a way too much reservoir. We believe that liquids have leaked out of that system. There are gas and liquid shows. In fact, there's one sand with oil in it, but it would appear that there's too much sand in the system and the sealer's blown. So the focus at the moment is taking that results in, taking the seismic data, and reassessing what that means in terms of the volumes in the [ strike ]. I remind you that it was obviously the original Northern well found basically intermediate sands. So obviously, we know it works where we have x meters of sand. If you have too much or too little, it's different. So we're mapping it out, that work will continue for about another 6 months before we know what remaining volumes there are to develop what the next action is.

Yes. On the portfolio question, clearly, as I said earlier, our niche understanding and strength is in it. We don't see ourselves as a major North Sea player. We have a position, it's non-core. We've made it public that we're looking to dispose the portfolio. Obviously, we want to maximize what we get from this portfolio, and that's what we will be working on over the next months. So no, I can't give you any more details right now. As we've said, we have received interest for the portfolio. We're evaluating all options and trying, as always, to do the best for our shareholders.

There are no further questions at this time. I will hand the call back.

Well, with that, I would like to thank everybody again for participating today. As I said before, a very exciting year, it's coming up for us. We look forward to delivering on all the key milestones I mentioned and speaking to you very soon. Thank you all. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. .