Energean increases resource base by a fifth

Energean (ENOG) reported a statutory earnings profit in 2022, achieved despite volatile energy markets and the imposition of a $119mn (£98.3mn) windfall tax in Italy. From an operational perspective, the company delivered first gas from its Karish field in October 2022 and initiated hydrocarbon liquid exports in the early part of this year. It is difficult to gauge the significance – if any – of the early move into export markets. But the company remains on track to deliver 4.5-5.5bn cubic metres (bcm) of gas into the Israeli domestic gas market this year, while work is also under way to increase the capacity of its floating production storage and offloading (FPSO) unit. It remains on target to deliver production of 200,000 barrels of oil equivalent per day (kboed) in the second half of 2024, while production guidance for this year has been confirmed at 131-158 kboed. 

Volatility has been a troublesome feature of energy markets over the past year or so, but Energean’s chief executive, Mathios Rigas, said that the company’s gas contracting strategy puts it in “a unique position to have a very predictable and stable cash flow despite turbulence and challenges in the international financial markets”. Prospects are also supported by a seemingly perpetual energy deficit in the region. 

The discovery and de-risking of new natural gas resources through the period helped to boost the company’s resource base by a fifth, while helping to displace coal-fired power generation over the medium term. Rigas notes that 2022 marked the point when “a long-held vision became an operational reality”.

The debt level points to a company moving through an expansionary phase, yet adjusted operating cash flow outstripped investing activities. And though financing costs remain a concern, energy companies tend to throw off cash once planned production comes on-stream. We remain buyers with the shares 30 per cent adrift of their consensus target price. Buy.  

Last IC view: Buy, 1,229p, 23 Feb 2023