Mediterranean-focused Energean sees lower pro forma production in 2020

London — UK-listed Energean Oil & Gas -- which hopes to close the $850 million acquisition of the upstream business of Italy's Edison soon -- expects its 2020 pro forma production to come in below last year's level, the company said Wednesday.

Energean is building a portfolio of mostly gas-focused Mediterranean assets, with the Edison E&P unit set to significantly boost the company's output.

In a trading statement Wednesday, Energean said its guidance for 2020 production -- including the Edison E&P assets it is retaining -- would be 42,500-50,000 b/d of oil equivalent.

That compares with pro forma production last year of 56,400 boe/d from the Edison E&P business that will be retained by Energean plus 3,300 boe/d of Energean's own production from its Greek assets.

The Edison portfolio is made up of producing assets in Egypt, Italy, Algeria, the UK and Croatia, but Energean has agreed to sell the UK assets on to Neptune Energy for $250 million, while the Algerian asset sale now looks likely to be blocked by Algiers.

"The transaction is now expected to exclude the Algerian asset," Energean said Wednesday, adding that it did not expect it to affect its ability to close the transaction on the remainder of the assets.

"Energean is working to close its acquisition of Edison E&P as soon as possible in 2020," it said.

Production breakdown

The expected production in 2020 would be made up of the Edison assets in Egypt (32,000-37,000 boe/d), Italy (8,000-10,000 boe/d) and Croatia (500 boe/d), plus Energean's own Greek assets (2,000-2,500 boe/d).

The biggest drop is expected from the Egyptian fields, where production last year was 45,500 boe/d. Energean did not give a reason for the expected decline in Egyptian production.

Edison E&P's working interest production in Algeria last year was 5,200 boe/d from its 11% stake in the Reggane Nord gas project, which started production in December 2017.

The Algerian assets were due to be part of the acquisition, but Algeria's state-owned Sonatrach said in December it wanted to discuss the transaction with Edison ahead of a potential pre-emption of the deal.

Reggane Nord is operated by Sonatrach with a 40% stake, while its other partners are Spain's Repsol (29.25%) and Germany's Wintershall Dea (19.5%).

The potential block by Algeria to the Energean/Edison deal follows a similar move by Sonatrach in November with regard to assets eyed by France's Total.

Sonatrach opted to exercise its pre-emption rights over the assets of Anadarko Petroleum -- including the Hassi Berkine field -- that were to be sold on by new owner Occidental Petroleum to Total.

Energean in Israel

As well as closing the Edison E&P deal, Energean remains focused on first gas from is portfolio of gas field assets offshore Israel, the company said.

The Karish and Tanin fields are "on track" to deliver first gas in the first half of 2021, CEO Mathios Rigas said.

"We have now secured 5 Bcm/year of firmly contracted gas sales to Israeli domestic buyers, 1.3 Bcm/year of contingent gas sales and 2 Bcm/year of potential sales to be discussed under a letter of intent with Greece's DEPA," Rigas said.

With the above, Energean is "fast approaching" its goal to fill the capacity of its 8 Bcm/year dedicated floating production vessel, the Energean Power.

The Energean Power FPSO hull is expected to sail away from China in March 2020 and the FPSO itself sail away from Singapore at end-2020, the company said.