Energean plc has entered into a binding agreement to sell its portfolio in Egypt, Italy, and Croatia to Carlyle International Energy Partnersfor an enterprise value of up to $945 million, with $820 million being firm. The transaction is expected to close by the end of 2024, subject to regulatory and antitrust approvals.
Compelling Transaction Metrics
- The EV of up to $945 million represents more than a threefold return on the portfolio, which was acquired for $284 million in 2020.
- A firm EV/2P multiple of $5.4/boe, a significant increase from approximately $1.2/boe at the time of acquisition.
- The transaction is expected to be immediately accretive to free cash flow.
- Energean plans to use the proceeds to repay the $450 million PLC Corporate Bond and distribute a special dividend of up to $200 million.
- The transaction is projected to yield at least $7.5 million per annum in G&A savings.
Strategic Rationale
This sale allows Energean to streamline its portfolio, focusing on its gas development strategy, primarily centred on the Karish Field in Israel and the Anchois field in Morocco. This approach aims to maximise asset monetisation, free cash flow generation, and shareholder returns.
- The transaction optimises the portfolio by divesting later life assets, reducing over 60 percent of the Group’s decommissioning liabilities, and enhancing free cash flow in the short to medium term.
- Energean will maintain and seek to grow its footprint in the Mediterranean and explore opportunities in the EMEA region, particularly where there is long-term policy support for gas and coal displacement.
- The Group will also focus on creating a Carbon Storage Hub in Greece and the wider Mediterranean via its EnEarth subsidiary.
- Post-closing, Energean’s scope 1 and 2 emissions intensity will reduce by around 40%, accelerating its 2035 target by 10 years.
Leadership Comments
Mathios Rigas, CEO of Energean, highlighted the significant return on investment and the transaction’s alignment with Energean’s strategic objectives, including enhanced value creation from Israeli assets and new opportunities fitting the company’s core business drivers: reliable dividends, deleveraging, growth, and a commitment to Net Zero.
Bob Maguire, co-head of Carlyle International Energy Partners, expressed enthusiasm for acquiring the high-quality assets in Egypt, Italy, and Croatia, which are well-positioned to support the energy transition.
Transaction Terms and Consideration
Carlyle’s offer includes:
- $504 million upfront cash consideration.
- Working capital/cash adjustments from the effective date to closing.
- A $139 million vendor loan with a 6-year, 3-month tenor, and interest at SOFR + 7 percent in year one, plus 0.5 percent for each subsequent year.
- $125 million capped contingent consideration, varying based on production and commodity prices over 2025-2028.
- An uncapped contingent payment linked to the recent Location B well in Egypt, based on reserves and production exceeding pre-drill estimates.
Sale Portfolio
Energean acquired Edison E&P in 2020, which included assets in Egypt, Italy, and Croatia. The portfolio has 150 mmboe in net working interest 2P reserves (70 percent gas) and 2023 net working interest production of 34 kboe/d (37 percent gas), generating an adjusted EBITDAX of $264 million in 2023. The gross assets attributable to the transaction were $1.67 billion, with liabilities of $1.27 billion, including $516 million in decommissioning provisions.
Use of Proceeds and Dividend Policy
Energean expects to use the transaction proceeds to repay the $450 million PLC Corporate Bond and facilitate a special dividend of up to $200 million. The Board will review the company’s dividend policy post-transaction close.
Conditionality and Timing to Completion
The transaction is subject to customary regulatory approvals in Italy and Egypt, antitrust approvals in Italy, Egypt, and COMESA, and Energean shareholders’ approval, which might be influenced by upcoming changes to the FCA’s listing rules. The transaction is expected to complete by year-end 2024, with a longstop date of 20 March 2025.
Employment Continuity
Staff employed by Energean Italy (including Croatia) and Energean Egypt will continue their employment under Carlyle’s ownership, which is committed to guaranteeing employment for 18 months post-completion, ensuring continuity and operational reliability.
For more information visit www.energean.com
