Carlyle acquires the portfolio in Egypt, Italy and Croatia

A major business deal was announced on Thursday 20 June by Energean plc (LSE: ENOG, TASE: אנאג) to the London and Tel Aviv Stock Exchanges. The company has agreed to sell its portfolio in Egypt, Italy and Croatia to Carlyle International Energy Partners for up to $945 million and no less than $820 million. Completion of the deal is expected by the end of the year, subject to obtaining all required regulatory and antitrust approvals.

The main features of the agreement

• Price up to 945 million dollars, more than three times the cost of acquiring the specific assets which was 284 million dollars in 2020.
• Transfer value of $5.4 per barrel (proved 2P reserves) of oil equivalent, compared to an acquisition cost of $1.2 per barrel.
• Additional potential price based on Energean’s recent discovery in Egypt.
• Payment of $504 million upon formal completion of the deal.
• Immediate free cash flow generation.
• Generating sufficient cash liquidity for Energean to fully repay its $450 million Corporate Bond and to facilitate the payment of an extraordinary dividend of up to $200 million to shareholders.
• Savings of at least $7.5 million annually in administrative revenue.

The strategy that led Energean to the transfer agreement

• The transfer of assets in Egypt, Italy and Croatia allows Energean to rationalize its portfolio, focusing even more on its gas-based development strategy, which is signaled by the development of the Karish and Karish North fields in Israel as well as the recent entrance to the Anchois field in Morocco. It is a strategy that enhances the portfolio’s economic recovery prospects, generates free cash flow and maximizes shareholder benefits.
• The transfer agreement also improves the quality of Energean’s portfolio, as more than 60% of the company’s decommissioning obligations are transferred, resulting in improved cash flows in the medium-short term.
• Going forward, Energean will seek to further develop in the Mediterranean but also look for opportunities in Europe, the Middle East and Africa, especially in areas where there is a long-term support policy for natural gas and to replace coal.
• The group will also focus on creating a carbon dioxide storage hub in Greece and the wider Mediterranean area through its subsidiary EnEarth.
• With the completion of the agreement, the carbon footprint (Scope 1 and Scope 2) of the company is reduced by 40%, to 5 kg of emitted CO2 per produced equivalent barrel of oil, achieving the target set for 2035 10 years earlier.

New cycle of growth and shareholder value

On the occasion of the agreement, Mr. Mathios Rigas, CEO of the Energean group plcsaid: “This agreement opens an impressive new chapter for Energean. Today, we are capitalizing on a significant return on the investment we made when we acquired this portfolio four years ago. The transfer leverages our strategy to maximize value for our shareholders and confirms the absolutely disciplined logic in the placement of capital, as evidenced by the parameters of the deal combined with the expected distribution of an extraordinary dividend.

Looking ahead, the deal unlocks significant management capacity and provides financial flexibility to drive future growth. Our focus will now be on creating enhanced value from our Israel portfolio, as well as evaluating new opportunities that fit Energean’s business philosophy: growth, reliable dividend payment, debt reduction and commitment to Net Zero.

“Carlyle is the right custodian of the transferable assets and will be an excellent home for our colleagues, who we wish every success and whose progress we will follow. I want to personally thank all colleagues in Egypt, Italy and Croatia for their hard work and dedication over the years.”

From the side of Bob Maguire, head of Carlyle International Energy Partners, commented on:

“We are particularly pleased to acquire this portfolio of high-quality assets in Italy, Egypt and Croatia, countries that are encouraging new gas development, which we believe will play a central role in the energy transition.

We look forward to supporting the transformation of these assets into a growing platform for hydrocarbon exploration and exploitation in the Mediterranean, through the implementation of short-term developments, the unlocking of organic growth opportunities, acquisitions and mergers, as well as the completion of planned decarbonisation plans.”

The portfolio being transferred

In 2020, Energean had acquired Edison E&P, which had assets in hydrocarbon exploration, development and production in Egypt, Italy and Croatia, among others. Energean’s portfolio in these countries had reserves of 150 million barrels of oil equivalent proved (2P) reserves (70% in natural gas) and daily production of 34 thousand barrels of oil equivalent (37% in natural gas) in 2023 In the same year, this portfolio generated earnings before taxes, interest and depreciation of $264 million.

Employees previously employed by Energean Italy (which includes the Croatian arm) and Energean Egypt will continue to be employed by Carlyle, with the new buyer committed to maintaining those jobs for at least 18 months, in a development that ensures continuity of employment and contributes to operational reliability and safety

Rothschild & Co acted as financial adviser for Energean, while White & Case had the role of legal advisor.