Energean plc (ENOG) Earnings Call Transcript & Summary

Ladies and Gentleman, welcome to the Energean trading operational update presentation. My name is Laura, and I will be your operator for your call this morning. I will now hand you over to Mathaios Rigas, CEO.

Good morning, everyone, and thank you for joining our call today. Let me start today with some highlights of our results, our trading update. I think the biggest message that I want to give to everyone today is that 2023 was a year that Energean turned the corner and became a major gas producer in the East Med. Full-year production of 123 barrels -- 123,000 barrels a day is representing a 200% increase versus our '22 numbers, and that continues to grow. Peak production reached 150,000 barrels of oil equivalent a day, and our exit was about 143. So we have become a major producer of gas in the East Med, and we continue to grow our production base. Panos will go through our financial performance, but it has been a solid year with close to $1.4 billion of revenues, EBITDAX of $925 million and liquidity strong at $600 million at the end of the year. Group leverage continues to come down, and it will continue to come down, in line with our plans. We will talk about the various countries. Egypt has been important, beyond Israel, obviously, which dominates our production. And there, following the initial NEA#6 well that was disappointing during 2023. We had 2 very solid results from the remaining 2 wells that were brought on stream, on budget, on time towards the end of '23. And the project is producing in line with expectations, close to [ 13,000 ] barrels of oil equivalent a day. But this company is not just about production, existing production. It is about further growth with projects that are being developed. We will talk about them later in the presentation. Karish North, expected very shortly. Second oil train will be installed as soon as the security situation allows. And Cassiopea, the major project in Italy, is expected to come on stream in the summer of 2024, led by ENI, our operator there. Beyond that, Karish -- sorry, Katlan, Phase I, FTP has been approved by the Israeli government. So now the decision is upon us to finalize the EPC terms. We're obviously looking to improve costs, and there is no impact on timing of the project. We have farmed in to a Morocco project, a new country entry for us, a diversification of our business in line with strategy, gas in the wider Mediterranean region. New areas of growth we see in Italy, where the country is starting to open up concessions in the Upper Adriatic, previously frozen areas are now opening to us and other operators for development. We are working very closely with the Egyptian government to improve terms on Abu Qir, [ NEA and NI ]. And last but not least, our Prinos Carbon Storage project shows a solid development, with the project being included in the European Commission's Project of Common Interest. On our financial side of our business, we continue to deliver dividends in line with guidance, $214 million return to shareholders. And we continue to be committed to our dividend policy that was announced previously. On Page 5 of the presentation, I think that illustrates more than anything else the solid growth that we've seen. I remind everyone that Energean in 2018, when we listed on the [ London ] Stock Exchange -- the Tel Aviv Stock Exchange, was a company producing only from the Greek asset from Prinos close to 2,000 barrels a day. Within 4 years, 5 years, including 2023, the 2,000 barrels has become 123 and next year, we expect it's going to continue to grow. We're diving towards 155 to 175. There are a lot of factors that will affect this production. Most important point is that our FPSO is working and is working extremely well. We will talk about uptime later. And our guidance on the near term remains a 200,000 barrel a day target, which we are committed to achieve from our existing assets. I will hand over to Panos to go through our financial results, and I'll come back to go deeper into each country of operation.

Thank you, Mathaios, and good morning from me as well. As mentioned, 2023 was a massive year for us, where in spite of the commissioning delays of [ European Commission ] at the beginning of the year, lasting ongoing geopolitical tensions in the region, our delivered 3x increase in gas production up to 6 bcm, 2x increase in liquids production to 21,000 barrels a day, bringing our group production to a total of [ 123 ] barrels per day, which, as mentioned again, is 3x what was recorded in 2022. As expected and in spite of the softer commodity prices compared to last year, we more than doubled revenues to north of $1.4 billion. We achieved that by still keeping our cost of production well under control and getting very close to the $10 per barrel of cost, excluding royalties, this drops well into the single digits. EBITDAX doubled to $925 million. And as communicated before, our CapEx intensity softening after the peak year of 2022 with 30% less spend on CapEx in 2023. Finally, leverage has halved to 3x net debt to EBITDA, well on track to achieve our target to stabilize this well below 2x EBITDA. Our absolute net debt has stayed within guidance of $2.8 billion, in spite of the [ $100 million ] of windfall taxes we had to face in Italy. And we paid that in the summer of last year. Moving to Slide 8. As we're getting closer to our target plateau production rate of 200,000 barrels a day, we're focusing on profitability and operating efficiency metrics. As we grow production, our operating netback is growing, even compared to 2022 that our Italian assets enjoyed record oil and gas prices, and we're now sitting well at 65%. Our operating cost per barrel is dropping even faster than expected at a level close to single digits, as I said, in spite of the bulk of our production being in [ all city cadres ] now and the continuing inflationary pressures in our sector. Finally, and as expected, 2022 was the big capital intensity period for us. And in 2023, we recorded 650 million of CapEx, 250 million less compared to 2022. Moving on to our guidance. For next year or for this year '24, it reflects the expectation for another growth year for Energean, what we consider to be the finest trade in our journey to achieve the production profitability targets we had set a few years back. As Mathaios mentioned, we expect to bring our fourth well in Israel into production, Karish North, and complete the installation of the second oil train. And of course, in Italy, we expect the Cassiopea gas well to come on stream around summer of this year. Our production guidance for the full year is around 155,000 to 175,000 barrels per day, with all the key country of operations, Israel, Egypt and Italy, all recording increased production. Our net debt is expected to stay at similar levels to 2023 as we continue spending in our [ sanctioned ] projects and slowly and cautiously increasing our capital spend in growth projects like the Katlan development and of course, the operational drilling in the new country entry in Morocco. Production costs are expected to be at around [ $600 million ], again driven by Israel, and a big part of that reflects the [ royalty pay ] linked to the production in Israel. Moving on to the development CapEx. Probably 2024 will be the first year since the IPO that Israel will not dominate the capital allocation as we expect most of our capital development CapEx to go for the Cassiopea development. And although we do have budgeted around $100 million of spend in our Katlan development, the first stages of the development that we will talk in the following slides. After a couple of years of break, our growth capital allocation, exploration spending is back to around $100 million to $150 million. That is driven by 4 exploration/appraisal wells, one that is currently ongoing in Egypt, they are Orion well, alongside ENI and its partners. 2 appraisal -- low-risk appraisal wells in Italy are around the Cassiopea gas field and as mentioned, our appraisal drilling in the new country entry in Morocco. Finally, our decommissioning expenditure, we continue guiding, as we have done in the last couple of years, of around $40 million. This is a cost line item that we continue undershooting. The teams in Italy and U.K. did a fantastic job for extending the profitable life of those fields. In 2023, we underspent that in for more than half what we have guided. I'm not ready to revise this number down. We're only starting, so we're keeping it at $40 million, $50 million. But we do expect this number to go below and probably be revised at the next guidance as we go. So with that, Mathaios, back to you.

Thank you, Panos. I move to Slide 11, and I want to tackle the issue of production uptime, gas demand in Israel, which is dominating obviously our numbers. First message, as I said earlier, the FPSO is working extremely well. And I'm very proud that Energean at 100% ownership is owning and operating a machine that had 100% uptime in the last months, 99% in the fourth quarter. So our operating team is working the machine as it should. In terms of production, we have, at the moment, the capacity of 6.5 bcm a year. That will increase as soon as we're able to install our second oil train, and that will happen as soon as the security situation allows in Israel. The [ M10 ] module, as we call it, is done, finished, ready to be lifted on the FPSO. I cannot give an exact date. We estimate midyear, we will be up and running. But that depends on situations which are totally outside our control. In terms of the market, what we are seeing, what we did see was a warmer winter, and that has impacted short-term gas demand in Israel. We see coal phaseout being slightly delayed. And I think everybody would understand that when countries are more, they need every source of energy security to be available in case required. That has an impact on less efficient CCGTs and slightly lower gas demand. The response to that from us as a management team is to go out and contract more gas to fill the boat, and that's exactly what we plan to do in the coming months. So we see a shift -- a slight shift to the right, but no real impact in the long-term demand for gas in Israel and in the region. Egypt today is facing long electricity cuts because of shortage of gas. So the region needs gas, Israel needs more gas, and we're there to contract and sell and fill the boats, as I said earlier. So that's our #1 priority for the coming months. On moving to the development side. We talked about Katlan, the Israeli government has approved the FTP on time, as always, and we thank them for that. The FID is expected upon the finalization of our EPC discussions. But effectively, we are already ordering long lead items to secure the timetable. So I don't want to focus on the date because for me, what is more important is to make sure that we meet our contractual obligations through the development of Katlan, which also, I remind everyone, has no restrictions on export of gas. Our [ M10 ], which if you have in front of you the presentation, you can see the size of it, as I said earlier, will be installed as soon as we're able to do it, depending on the security situation. Moving to Egypt. Egypt has seen stable production of about 25,000 barrels a day, again, in 2023, despite the decline. I remind everyone, this is a very old, mature gas field that is declining and the operating team has done a great job to arrest this decline and even see increase in production through the [ NEA, NI ] development. What we are doing in cooperation with the Egyptian government is we're trying to optimize the existing licenses through a merger of the 3 concessions that will allow us to see a longer life of the field, extend the [ economic ] level of the field that will also allow us to invest more. We're drilling 1 more well as we speak that we expect to have results in the coming months. The big well, obviously, in Egypt and not only for us but also for the region, is Orion. [ ENI ] is the operator. We have an effective [ 19% ] stake. It's a multi-Tcf prospect. High risk, obviously. Exploration may bring results that could be a game changer for us and for the region, but also could be a big disappointment. We are not the kind of company that promises big exploration results. But obviously, if this well comes in, it will completely change the situation for us and for the East Med. So in the next 40 to 60 days, we should have results, at least have drilled the reservoir and know what is going on out there. Moving to Italy. Italy, again, same message, solid, stable production, 11,000 barrels a day, growing with Cassiopea coming on stream later in the year, we expect summer, based on the latest expectations of ENI, the operator. What we are seeing in Italy, and we're very pleased to see that, is new areas of growth, which were previously frozen. I mentioned it earlier, in the Upper Adriatic and the Sicily channel, we see the government opening up areas for development. I'm sure I will be asked the question how much is expected from there. I would say, 30% to 50% increase in reserves could be achieved from the prospects we have there, but it's still early days. Moving to Greece. The future of Greece and the future of Prinos is clearly the Carbon Storage project and the conversion of the Prinos field into the first CO2 storage in the East Med. We've seen solid progress in the project. It has been included in the European Commission Projects of Common Interest. We have nonbinding MOUs of at least 5 million tonnes per annum, which exceeds the capacity of Prinos. Prinos has roughly a 3 million tonne per annum capacity of storage, as confirmed by studies we done. And we have achieved support from the Greek government, from the [ government ] Resilience Fund, of EUR 150 million grants that have been committed, and we expect them to start hitting our accounts in 2024 to support the development of the project. This, for us, is a very important project, following also COP 28, which I attended. There's a big focus on the industry on decarbonizing heavy industries, and Prinos will play that role for us and for the Greek and East Med industries in the decarbonization efforts of the government. Morocco, we farmed in the Chariot's license offshore Morocco. We're very excited about this project. It's a discovery that needs an appraisal well. We plan to drill this well later in the year. We will be visiting Morocco and expecting the formal approval of the Moroccan government to name us as the operator of the field. We have, at the moment, an 18 bcm gas development, needs to be appraised. But the great news for us and Morocco is that this is a market that has a much healthier gas price than the East Med. And most importantly, it is connected to the European Union market through pipelines, so we are tapping the big European market. There is exploration upside there, again, in line with what I said before, we are not the kind of company that will be promising big exploration results. We will celebrate them when they come. But Morocco, for us, brings a very interesting and very exciting gas development story, in line with our strategy to be the leading E&P gas company in the Mediterranean. Last but not least, ESG, I know that when we have wars around the world, ESG is not in the forefront, but we continue to progress our net zero commitments. We are well below double-digit CO2 emissions in terms of kilos of CO2 per barrel of oil produced, and we will continue to reduce. Again, looking back to COP 28, all the pledges that were agreed by the E&P sector that was present for the first time in the conference were pledges that Energean has made years ago. We were the first E&P company to commit to a net zero strategy. We were -- as you can see from the slide on Page 17, have achieved huge decreases in our carbon emissions, our switch to gas. Our commitment to becoming more efficient and emit less CO2 is exactly what the industry is doing today. So with that, I will close with our outlook. 2024 is going to be another year of the material growth of our production towards our near-term targets. The three key topics to look for is the increase of the capacity of the FPSO, the new gas contracts that we will look to sign and bringing Cassiopea on stream. Demand in Israel and demand in the region will come, and we will look to sell as much gas as we can, both in Israel and the rest of the region. Beyond our production, the growth projects of Katlan, Morocco, the Orion well and the Carbon Storage projects are the four key topics to look for in 2024. In terms of our capital, we continue to be disciplined. We've set a target of $1.75 billion of EBITDAX that will allow us to reduce our leverage to 1.5x, and we will continue to be committed to our quarterly dividend policy, as announced before. Last but not least, as I said, being a leader on the ESG front, we continue to reduce our emissions and continue our ESG strategy. As I said earlier, Energean has turned the corner, a major gas producer, but we're not stopping here. We grew from 2,000 barrels to [ 123,000 ] barrels in 2023. We intend to continue to grow where we see the right opportunities. With that, I close the presentation and happy to take any questions.

[Operator Instructions] The first question is from the line of David Round with Stifel.

Thank you. Thanks for the presentation. First one, just I suppose it's good to see the second oil train arrives in Cyprus. I was just wondering how long that installation will take when you decide to do it? And also, are there any approvals that you need for this? And is the approval process in Israel running smoothly with everything that's going on? And then secondly, just interested in [ this slower ] coal phase-out that you mentioned. Obviously, there are exceptional circumstances, I think we can all understand that. It sounds like you're accepting of the situation, you're not seeking any compensation or government concessions to make up for your kind of -- you realize that there's a bigger picture in Israel right now. Is that correct?

Well, David, how long will it take to do a heavy lift? It's a couple of days. When will it happen? I -- as I said earlier, I can't guarantee when the security situation will allow the operation to happen. But we expect it to happen in the first half of the year. Approval process in Israel has not been impacted. And I think the proof of that is the approval of the development plan of Katlan before the end of last year, which is exactly what we expected. And although a lot of people, in the past, were telling me that Israel is a difficult country to operate, I have to say that every time we needed the government to give us a permit and approval, it has done it on time and the cooperation is excellent with the government. I remind everyone that when Tamar was shut down, Energean stepped up, backed everybody up, and we ended up producing more than 60% of what the country was consuming. So we are a very strategic player of the country, and I think that reflects in the relationship we have with the government. The coal phaseout that you questioned and compensation, no, we will not see compensation. What we will do is look to do what is it within our control, sell more gas to the market in the region. That is what we do, and that is how we operate in the countries that we do business with. Same in Italy, same in Egypt. Every country has its own issues, its own problems. Rather than fighting governments, we work with governments to try to find ways to grow our business. Example, Italy, as Panos mentioned, windfall tax, we are disputing the payments, obviously, but we are more interested in new areas of development. Egypt, we all know payment delays, issues with the finances of the country. We don't fight the government. We work with the government to improve the fiscal terms of our licenses. Israel, same. We're looking to invest more in Katlan, and this is what Energean is about. We are in the East Med. We understand it's a complicated and challenging region. But we know it inside out, and we know how to navigate around very, very difficult situation sometimes as we've done in the last 5 years since we listed on the market. And we've dealt with COVID, we've dealt with wars, we've dealt with issues around us. And every time we find solutions to continue the production growth, the delivery of results despite the challenging environment next to us.

Okay. That's very clear. Can I -- just a quick follow-up, it might be one for Panos. But just the installation of the oil train, just to check that, that is in your CapEx number, even with the uncertainty about when it actually will happen?

Yes. Yes, it is. The bulk of the CapEx for the oil train has already incurred by constructing it. The remaining is the installation. But as Mathaios said, this time, it is rather [indiscernible]. So yes, it is included, but it is not the bulk of the CapEx for Israel.

The next question is from the line of Matt Smith with Bank of America. Please go ahead.

Thanks for taking my question. And thanks, as ever, for a detailed presentation, very useful. I've had a few, if I may. And the first one was really around the sort of near-term guidance and the dividend. I think the guidance or the indication before is essentially once you reach your near-term guidance, which is -- had to have a few metrics associated that the intention was to double the absolute dividend demand. So I just wanted to clarify if that's still the expectation and whether you're able to indicate when that might be? I appreciate there's perhaps some uncertainties at the moment with your second oil train. So that was the first question. . My second question would be around the Katlan project. I just wondered whether you -- do you have any concerns about progressing that project at the moment, given the geopolitical impacts you had with the Karish oil train? I just wondered whether there was any consideration to sort of pause in that project or slowing that down, given that you already have the wells to produce around FPSO capacity? So just wondered, any details around that might be interesting. And then lastly, sorry, if you don't mind, just squeeze the third one, is really around the Orion well in Egypt. I guess I just wanted to question you, this well could be a game changer for the company and the region. I'll let you specify if it does come in line with some of the predrill expectations that we've seen. I guess I just wanted to clarify, would that facilitate or necessitate sort of a wholesale change to your capital allocation program? Have we seen it today? Or would we sort of very much expect any potential development there? I know, we appreciate talking about [ hypotheticals ], but any potential development there to fit within the sort of framework and the dividend policy and everything else that you've laid out so far? So thank you very much.

Mathaios, let me start with the dividend and then you pick up the rest.

Yes.

Okay. So as mentioned, we're not changing our dividend policy, so it remains. And communication we had with the targets, we have said we are fully aligned, and we expect to achieve them. That's why we're not making any changes. I do not want -- and I think it will be wrong at the time to micromanage the timing of us increasing the quarterly payment. We're not -- given quite a few of uncertainties right now, we're not prepared to commit to a date. I can say, and as I have said before, right now, it looks that we will be able to revise the current one not earlier than fourth quarter of this year. And I expect that to be based on the current projections for the first quarter of next year, again, assuming that things continue as we plan and as we achieve our targets. Now it's not about the next 8 or 9 quarters, of course, the dividend policy. We want to be a long-term dividend player -- dividend payer that is credible and don't have to change the amount with every adversity or anything going not according to plan. We had to face a delay in the commissioning of our FPSO, geopolitical tensions that no one expected. There were decades since we had this type of tension in the region we operate. And we had windfall taxes, and we didn't change the amount of dividend that we are paying. So for us to increase it, we will increase it where we're 100% sure that we won't need to revise it again. And it's not only about the next 8 to 9 Quarters. It is the long-term dividend stream that we expect to give to our shareholders.

On the second question, are we considering the pause of Katlan? Absolutely not. And the reason I'm saying that is because I do see a lot of demand for gas, long term, in the region. This world, this region, countries of operation need gas, so we need to be able to produce this gas. Obviously, gas fields decline, so we need to make sure that we meet our contractual obligations. And remind everybody, we have 15-year contracts with take-or-pay provisions and ACQ. This year, we saw buyers nominating below ACQ for the reasons we mentioned, but I don't think this will continue long term. So we need to bring Katlan on stream to have absolutely maximum capacity for both gas and oil production for the years to come. The Orion well and what does it mean, I think it's too early to say. If it is a [ 10 Tcf ] discovery, obviously, it's going to be the game changer I mentioned earlier. If it is a 1 to 2 Tcf discovery, it's going to be a very different story. If it's a dry well, it means nothing for the future. So I think it's too early to talk about developments and impact on our business. Rest assured that as major shareholders of this business, we are very committed and disciplined to our capital allocation policy that Panos mentioned. So for us, the maintenance of the dividend policy, the deleveraging and the continuous growth are the 3 pillars that this business will continue to focus on, regardless of what happens around us. And when -- and I really hope that the results come in at the upper end, when that happens, we will talk about what is the best way to execute the development.

The next question is from the line of Sasikanth with Morgan Stanley.

I had two, please. The first was related to the Karish North start-up. You're talking about unexpected start-up now in 1Q '24. I was just wondering what was left to do for the start-up from here on? Slightly related to this, and then it's possibly a clarification, I was just wondering if delay in installing the second oil train in there has any impact at all for the start-up of the Karish North and also to the overall gas capacity of the FPSO? The second question was related to Morocco. If there is an appraisal well planned and if the appraisal well there turns out to be successful and achieve the objectives, how should we think about development of the field there? How quickly should we expect for EU to move on to a development in that area?

Thanks for the questions. Karish North start-up, at the moment, as you saw from the slide that I presented, we are producing to meet nominations. So it's not critical to the business when Karish North starts up. We will start up -- we will clean up the well, and we will start it up in line with nominations and in line with gas demand in the region. So not to make it a major event because at the moment, as I said earlier, we have the capacity to do 650 million [ caps ] a day from the existing wells. So it will start, but it's not critical to the business. What is more critical is gas sales, and that is what we're focused on at the moment. On the second oil train and whether it impacts our overall gas business, the wells that are coming on stream do produce liquids, and we have a unique situation where our production of liquids at the moment is around 16,000 barrels of liquids a day. It will grow as gas production grows. So we need the second oil train for backup of the first one, but also to be able to deal with higher liquid production. Again, this is not critical for the next months. What is more critical for the next month is to sell more gas, which is what we are focused on. Morocco development, rest assured that Energean as a company moves extremely fast. You've seen us, we took over Karish in 2017. 2018, we took the final investment decision. And with COVID and big problems in shipyards around the world, we brought the field on stream in 4 years. We will follow a very similar path. We will move extremely fast. And the reason why we we'll move extremely fast is before there's a very healthy gas market in Morocco and in the wider region that underpins a fast development. I don't want to give you numbers on development costs at the moment because, again, it's too early. We will be ready to talk about this as soon as we drill that appraisal well later in the year. So for 2024, expect the appraisal well. And as soon as we have results, we will be talking about the optimum development plan, timing, impact on CapEx, et cetera, et cetera.

The next question is from the line of Egor Fedorov with ING. Please go ahead.

Thank you for picking up my question. Actually, I wouldn't imagine myself asking this question, but on the back of this Red Sea development recently, how do you actually estimate how Karish project is well protected from any hostile actions? This is first question. In terms of insurance of the project and the objects, what is that [ going ] secured with regards to disruption of any gas production deliveries, gas production or damage to equipment? And can you disclose the amount of, well, potential insurance? And those -- are there any changes in terms of price of insurance? I guess that October 2023, I guess, that the [indiscernible] cost maybe there is some long-term contracts. And on CapEx, what breakdown -- what exactly goes to like the existing investment projects from the announced amount? And what is that amount for the new projects like Katlan, Morocco and Orion?

Okay. I'll take the first question, and Panos will answer the insurance and CapEx questions. No private company, no matter how small or big, can provide protection against hostile military attacks. But a company that produced 60% of Israel's gas demand is critical to the country and is extremely well protected by the country's defense forces. So we are totally confident in the ability of the Israeli government, the Israeli military, the Israeli Defense Forces to protect the FPSO and not only the FPSO, every piece of infrastructure in the country, every piece of critical infrastructure in the country. I can't comment any more than that. This is protection and security provided by the government of Israel. We have seen, so far, no disruption, as we've said before. The people on the FPSO feel very safe. All the contractors that we worked with, continue to be working with us. So we've seen no impact. We have seen no impact on delivery of services or goods. And we are solving any problem, any difficulty. And this is what we're here to do. But beyond that, I think it's a government. Panos, do you want to take the insurance and CapEx questions?

Yes, I can assure you it has been pretty volatile, intense period the last quarter, as you can imagine, all insurers, we're worried around price. But I can assure you, as we have assured investors, bond holders and all our stakeholders are intact. Our insurance cover for the assets, it's more than $1 billion and includes [ one of their cover ], of course. And the BI, which again is north of 1 billion, which business [ disruption ] for 2 years, again, it's in place. Cost-wise, as we expect, premiums have increased, and we expect in 2024, that part of the cost line to increase. But we do know not have -- we have no visibility or any information that those covers will have been revised in terms of the cover we're getting. As a group, we are committed, of course, to continue having the best possible cover as comprehensive as possible in spite of the situation. So we are keeping all insurance companies and our brokers informed about what we do and what of course, the Israeli state is doing to keep those strategic assets well secured. Now regarding CapEx, on Israel, as I said, around 100 million of the guidance that we have given is attributed to Katlan for this year. We expect most of that expenditure to materialize towards the second half of the year. And on the rest of the portfolio, most of it -- most of the 250 million is attributed to Cassiopea, around 200 million goes into the project and the gas bill that we expect to bring online in the summer of this year. Have I missed something on the CapEx question that you wanted more clarification?

I think that's fine. Thank you so much for your explanation. Thank you for answering my questions.

The next question is from the line of Mark Wilson with Jefferies.

The most important thing for me in today's update was this point you made, Mathaios, about slightly lower gas demand in Israel and going out to look for new contracts. So can we understand then, therefore, that you have lost some contracts or some clients have changed the contracted demand? And therefore, so what are your current contracted gas supply [ contract ]? As we understood it, I thought it was over 7 bcm.

We have absolutely not lost any contract, Mark. But I'm sure you know very well from your experience in gas markets around the world that contracts have ACQs and have take-or-pay levels. What we are seeing is buyers of gas from our existing customer base because of the situation, nominating at levels below ACQ, giving us the ability to sell more gas to the market. So in the beginning of 2023, we obviously were very conservative and were limiting our sales efforts to see the nominations from the market. We have now a year of operation behind us. We see behavior from buyers. Obviously, there's seasonality, and I'm sure you understand that seasonality is everywhere in every gas market. In the summer, we see big demand. In the warmer months, we see less demand. So now we see that we can actually increase our contracts and increase sales, both to the local and to the export markets. So naturally, this is the evolution of a business. We learn the market. We see additional opportunities. We are going to go out and contract more gas, both locally and internationally. But no, we haven't lost any contract all our buyers are there. And our target is, as I said earlier in the presentation, in simple terms, to fill the boat and sell as much gas as we can to the maximum operating and production capacity that our technical team can produce.

Okay. Got it. That's really good clarity. So second question then is on those international markets and the potential for export gas from Karish. At interims, you spoke to getting the additional -- the 2 bcm for a future -- I think it's the Nitsana export pipeline. Are you able to export through your existing infrastructure and agreements from the Karish [ FPSO ]?

Two answers to your question. Karish, from Day 1 was and still is a field that is dedicated to the local market. Katlan that follows is -- has no export restrictions. So we are working with the developers of the Nitsana pipeline to secure capacity. But this is a project that is going to take a few years because of permits, because of long lead items. And that will be the bottlenecking the export routes to Egypt today. There are 2 export routes that exist today for Egypt. One is the EMG pipeline, and the second one is the pipeline that goes through Jordan. And obviously, Chevron and the other partners of Leviathan and Tamar are occupying most of this capacity. There is some export capacity today, but Katlan and the new pipelines are open to us to export market -- through export markets of Egypt. I'd remind you also that we are talking in the past about Cyprus, a country that is still burning fuel oil for power generation, and we are in discussions with them about the potential to export gas to Cyprus and bring their emissions down to the levels of every other European country. We have ongoing discussions in Egypt about exporting gas from our existing production, that would need the approval of the Israeli government. And we're not there yet because we do see a lot more demand in Israel. So we prefer to focus on what we consider solid demand with strong credit quality buyers that will buy and pay for the gas on time. And that is clearly the Israeli market for us. So that's why I said earlier, our priority at the moment is to sell or contract more gas and sell to high credit-quality buyers that we've seen as well.

Makes a lot of sense. Very good clarification in the Katlan point, very clear on exports.

[Operator Instructions] The next question is from the line of Ella Fried with Bank Leumi.

I have two questions or three questions left. The first one is about the potential use and the potential growth of Prinos. And what is exactly the usage? And what did you mean when you mentioned the potential for the area?

For Prinos in Greece?

Yes.

Yes. The Prinos field is a mature field that has been in production for about 40 years. It is approaching the end of its economic life. Obviously, the Epsilon project is the growth of the oil business. But we want to see beyond the next 3, 4, 5 years, and we want to secure the future of this asset as a Carbon Storage project. So the future growth of Prinos is not in oil, it is in the Carbon Storage business. And that is why I mentioned and I dedicated a slide in this presentation, showing the progress we've achieved with EUR 150 million coming from the European Union through the Greek Recovery and Resilience Fund, that's a grant. And this is a clear focus for our business. But as I said earlier, this is beyond the oil. Oil...

Yes. Yes, I know. I know the question actually is about the usage of the CO2. I mean, the storage, how is it going to serve if is there an industry blue -- green? What are your plans for the storage after it retires?

So Phase 1 of Prinos is oil production from Prinos and Epsilon. Phase 2 is contracts with the big emitters of the country, and the bigger emitters are the cement factories, the refineries, the power generators, the fertilizer companies. And we have, as I mentioned earlier, secured 5 million tonnes of LOIs from industrial emitters that want to store their CO2 emissions and not pay CO2 penalties that are being imposed by the European Union. This CO2 will be liquefied, transported, injected in Prinos and stays in the ground where it came from. So this is a Carbon Storage project that has close to 100 million tonnes of storage capacity over its life, and that can reduce the industrial emissions of the country significantly. 3 million tonnes represents close to 30%, maybe 40% of the industrial emissions of the country. So this is a project that stores the CO2 permanently in the ground.

Okay. The second question is about Italy, about Cassiopea. You mentioned in the presentation that you have 2 nearing -- field potentials there. So what is your expectation for this project for 2024? And then we say the following 2 years, how do you see the developments there?

I repeat what I've said twice so far, we are not the kind of company that tells stories about exploration wells and expectations of the development on the back of wells that have been drilled. You have to allow us, Ella, to drill the wells, confirm the results, and then we will talk about solid numbers and development plans. I prefer to see and view exploration, even appraisal wells, as investments that we can afford to lose, as I always say, and talk about solid results when the wells have been drilled.

Okay. We will wait patiently. And the last question is somewhat technical about Karish. Could you give us the production mix for the quarter and for the year between the gas and the liquids in terms of bcm and barrels?

Of course, we can. I will ask our IR team to give you a specific breakdown of gas and oil, so you have the specific numbers. So Maria Martin will take that and send you specific details.

Okay. And thank you for this very elaborate presentation.

Thank you for the questions.

The next question is from the line of James Carmichael with Berenberg.

I'm a bit late, so honest apologies if some of this has been covered. Just three quick ones. So just Israel and the outlook. I was just wondering how [ you're ] sort of finding it [ the country's plan ] to decommission those coal plants. [ Various people ] say they're going to be gone by 2025. Is there a risk, given the current environment, security of supply, et cetera, those -- the life of those plants have extended? And obviously, that has ramifications for [ free ] gas demand potentially for longer period. Secondly, on Egypt. Just wondering if you could give any sort of color on the potential life extension that you're thinking about from the consolidation of the 3 licenses there? And then thirdly, actually back in the -- sorry, just on the FPSO capacity. Just wondering if there's any impact on gas export from the second oil train? I guess, there's a bit less certainty on the timing of when that works -- gets completed.

Starting from your last question. As said earlier, the second oil train doesn't impact our ability to export. Exports are expected from Katlan, which is the field that has the ability to export. And that's not expected to come on stream in 2024, obviously. So there's no impact on exports from the second oil train. Egypt life expectancy, as -- again, as I said earlier, Abu Qir has been in production for decades. It is in natural decline. We are managing through interventions of infill drilling and of course, the addition of the NEA, NI production to [ arrest ] this decline and increase production. But we need an improvement of the fiscal terms, which we can achieve through the consolidation of the concessions. And this is not the first time that Egypt is doing this. There are multiple occasions where other companies have done exactly the same. We're following exactly the same route. It is -- doesn't make any sense to have three separate concessions in the same area owned by one operator. We are 100% there, as you know. It is less administration. It is less G&A. It is giving us the benefit of consolidating all the CapEx that has been spent on NEA, NI in the Abu Qir concession, and that increases the [ cost ] pool, allows us a longer economic life of the field. Obviously, we are talking also to the government about gas prices that will allow us to continue to grow the business and invest more into the longevity of the Abu Qir field. Your first question about Katlan, correct? If I missed that.

So the first is [ we also have ] binding Israel as plans after the train...

Yes, yes, sorry about that. On coal, again, this is, in my view, and this is my personal view; a very short-term issue. It is not a long term. We should -- no country will be able to continue to rely on coal-fired power generation. It is an extraordinary situation that we faced in the last quarter after the events of the 7th of October. And obviously, I think everybody understands that in war situation, every source of energy supply has to be there to secure the country's electricity. Today, this [ well is back ] into a normal situation. And we will be -- I would be visiting in the next weeks again. And I invite anybody that wants to come down and see the FPSO and the situation of the country to join me. You see a country which is operating normally, with life back to a normal situation. So the short-term impact of the phasing or the delayed phasing-out of coal will not impact the long-term strategy of the country. But we are in a war. And this is something that we're dealing with. We see, as I said earlier, the opportunity to sell more gas to the local market, and that's what we plan to do over the next [ few ] months.

In the interest of time, we have to stop the Q&A session, and I hand back to Mathaios Rigas for any closing remarks.

Thank you, and thank you, everybody, for participating and your great questions. As I said earlier, Energean has turned the corner. We are a solid gas producer. We are dealing with a challenging geopolitical situation, and we're dealing with it the best way we can. The short-term impact of -- when we discussed, will be dealt with by management through additional gas sales and the focus on every country of operation to improve [ perils ], increase production and reach our long-term goals of 200,000 barrels a day plus our solid dividend policy, deleveraging and growth, all will continue to be our focus for the years to come. Thank you, all. And look forward to seeing you very soon. Thank you.