Energean announces strategic sale of Egypt, Italy, and Croatia portfolio to Carlyle

Energean plc entered into a binding agreement to sell its portfolio in Egypt, Italy, and Croatia to Carlyle International Energy Partners for an enterprise value (EV) of up to US $945 million, with $820 million firm. The transaction is expected to complete by the end of 2024, subject to customary regulatory and antitrust approvals.

The sale represents a significant milestone for Energean, generating more than a 3x return on the portfolio, which was acquired for $284 million in 2020. The enterprise value/2P multiple stands at $5.4/boe, a substantial increase from approximately $1.2/boe at the time of acquisition. This transaction is expected to be immediately accretive to free cash flow, providing sufficient cash proceeds to repay in full the $450 million PLC Corporate Bond and facilitate a special dividend of up to $200 million.

Energean CEO Mathios Rigas stated, "This deal represents an exciting new chapter for Energean. Today, we have realised a significant return on the investment made when we acquired this portfolio over four years ago.

The transaction delivers on our strategy and Energean’s ability to maximise value for our shareholders. It maintains our highly disciplined approach to capital allocation, as demonstrated by the accretive transaction metrics, coupled with an anticipated special dividend."

Strategic rationale

The strategic rationale behind the sale includes optimising Energean’s portfolio by divesting later-life assets, removing over 60% of the Group’s decommissioning liabilities, and improving free cash flow generation in the short to medium term.

The sale aligns with Energean's focus on its gas-weighted strategy, particularly its operations in the Karish Field in Israel and the recent farm-in to the Anchois field in Morocco. This strategy aims to maximise asset monetisation, free cash flow generation, and returns to shareholders.

"This transaction unlocks management capacity and financial flexibility to drive future growth," added Rigas. "Our focus will now be to create enhanced value from our Israel assets and evaluate new opportunities that fit Energean’s key business drivers: paying a reliable dividend, deleveraging, growth, and our commitment to Net Zero. Carlyle is the right custodian of the asset base and will create an excellent home for our colleagues. We wish them every success and look forward to watching their progress."

Bob Maguire, Co-Head of Carlyle International Energy Partners, commented, "We are delighted to acquire this portfolio of high-quality assets in Italy, Egypt, and Croatia, countries that are actively 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 scalable E&P platform in the Mediterranean, through the execution of near-term developments, unlocking organic growth opportunities, M&A, and accelerating the delivery of existing decarbonisation plans."

The transaction terms include $504 million upfront cash consideration upon closing, working capital/cash adjustments, a $139 million Vendor Loan with a 6-year and 3-month tenor, and a $125 million capped contingent consideration based on specific production and price targets. Additionally, there is an uncapped contingent payment for the recently drilled Location B well in Egypt, linked to exceeding pre-drill estimated volumes for various hydrocarbons.

Energean acquired Edison E&P in 2020, which included production, development, and exploration assets in Egypt, Italy, and Croatia. The portfolio has net working interest 2P reserves of 150 mmboe (70% gas) and 2023 net working interest production of 34 kboe/d (37% gas). The portfolio generated Adjusted EBITDAX of $264 million in 2023. The gross assets attributable to the transaction as of 31 December 2023 were $1.67 billion, with total liabilities of $1.27 billion, including $516 million for decommissioning.

Energean’s strategy focuses on being the leading independent gas-focused E&P in the Mediterranean and beyond. Post-transaction, the company aims to achieve cash flow accretion, focus on gas and gas development, and deliver on its Net Zero commitments, with a projected 40% reduction in scope 1 and 2 emissions intensity.

With the proceeds from the transaction, Energean plans to repay its corporate bond in full and facilitate a special dividend of up to $200 million. The company will review and potentially redefine its dividend policy upon the transaction's close.