Hello and welcome to the Energean full-year results call. My name is Saskia, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Mathios Rigas, CEO, to begin today's conference. Please go ahead.
Thank you, and thank you everyone for joining our call today. Thank you for being with us. I would like to start today with the key highlights of what we've seen over 2023, and then we'll go into the following year outlook. 2023 for us was a fantastic year, I would call it a transformational year, where we've seen production grow by over 200% year-on-year to reach approximately 150,000 bbl of oil a day. And it's fantastic to see the company continue to grow, to bring new projects on stream, to bring NEA/NI on stream in Egypt, to further stabilize our production in the region. We are operating, obviously, in a very challenging geopolitical environment, but all of our operations have worked without any impact.
We've managed successfully to navigate around all the issues, all the logistics, and our team is doing a fantastic job, totally committed to delivering on our promises. We are firmly on track for our stated medium-term target of 200,000 bbl of oil equivalent a day. To do that, we will try and, obviously, we've proven that we can do it, to maximize the utilization of our FPSO, which has been operating extremely very stable, and has achieved fantastic uptimes, which we will talk about later. On the financial side, it's been a record year: $1.4 billion of revenue, $930 million of EBITDA, and that allows us to continue our stated stable dividend policy and deleveraging, which is the other pillar of our capital policy.
Beyond what we're doing today, we're focusing, as I said earlier, on backfilling the FPSO and meeting the regional gas demand, but also continuing the growth with a new project in Morocco, a very exciting one that we will talk about later. On the emission side and the sustainability side, there's been a lot of back and forth in our industry, especially the majors have been going from reduction of production targets then going back to increase of production targets, reduction of emissions. Now, this week from Houston, we're hearing pushback on that. We have also been very stable with our commitment. We have reduced our carbon intensity. We are continuing to reduce our carbon intensity. We are firmly focused on our net-zero strategy, and all of that has resulted in a AAA rating by MSCI on our sustainability strategy. So, we are moving on our promises.
We are delivering on our promises. Moving to page 5 of the presentation, I want to focus on our production, which has continuously grown 2020-2024. We are at 150,000 bbl as we speak, and we are firmly on target, reiterating our guidance for the year of 155,000-175,000 bbl a day. 2020-2024 we'll see the startup of Cassiopea, which we expect in the summer of 2024, as advised also by the operator, Eni. We expect to see the peak gas demand coming in Israel that will bring our FPSO to its production limits and get us to the stated targets that we have for the year. A very important note on a slide on page 6 is the reserves that we are reporting today. Reserves that reach 1.3 billion bbl of oil equivalent of 2P and 2C.
We produced 47 million bbl during the year, and we're closing the year with 1.3 billion of 2P and 2C reserves. That gives us a group reserves life of around 19 years, showing everyone the longevity of this business and the stable nature of our production and future. On page 7, another illustration of our net-zero strategy. We've reduced our emissions by 86%, our carbon intensity by 86%, since our baseline in 2019 when we made the commitment for a net-zero strategy. So the key message here is we are continuing on our long-term strategy to be an ESG leader in parallel with being a stable producer of gas, underpinned by long-term gas contracts that give predictable cash flows. With that, let me hand over to Panos, our CFO, to take you through our detailed financial results.
Thank you, Mathios, and good morning to all. I'm moving on slide 9. As per our trading statement, earlier in the year, 2023 was a transformational year for Energean when most of the projects launched a few years back were completed and brought into production. As a result, the company recorded in 2023 three times the production of the previous year at 120,000 bbl of oil equivalent, doubling of revenue in spite of the abnormally high gas prices recorded in 2022, all this while keeping costs well under control and well within our target for single-digit cost of production per barrel. As a result, our profitability and cash flow metrics more than doubled in 2023, with our EBITDA at $930 million and our operating cash flow at $656 million.
As expected, we have now passed our peak capital intensity year of 2022, with CapEx dropping by 40% to $540 million in 2023. Finally, our leverage ratio, a key metric now that we're achieving our production targets, is dropping as expected from an opening of 6x, for 6x in the beginning of the year, close to 3x leverage, at the end of the year. On slide 10, we break down the components of our revenue line to demonstrate that 58% of our revenue is now under long-term gas contracts with floor mechanism protection resilient to commodity price fluctuations. We expect these numbers at current oil and gas prices to stabilize at around 60%-65% going forward. Another important point is the liquid production and revenue from our Karish asset, a clear differentiating aspect from the other gas-producing fields in the region.
Moving to slide 11, we do focus on maintaining the very favorable debt profile of the business, with average life of more than six years and average cost of debt of just over 6%. This is less than 2% of where the LIBOR is today, and that is the benefit of the fixed coupons and the fixed cost of debt we have built into our debt profile. We expect, as we meet our production targets, the leverage to drop to our target of lower than 2x, 2x EBITDA. Our absolute net debt has reached the peak, but we do not expect this to drop in 2024, as guided earlier in the year, and as we sustain our dividend stream by completing our last development in the Cassiopea gas field.
Speaking of dividends and moving to slide 12, we have returned so far more than $370 million to our shareholders, distributing $0.30 per share consistently since September 2022, in line with our dividend policy. In spite of quite a few curveballs we had to handle in the period since September 2022, such as the delayed commissioning of our FPSO in the beginning of 2023, $130 million of windfall taxes that we had to pay in Italy, and of course, one of the most serious conflicts breaking out in the region of our operations. Despite all those events, our dividends have stayed resilient, and we continue distributing the $0.30 to our shareholders. Moving on to slide 13, we reiterate our confidence to meet our guidance as presented in January. So I would say it's one of those no news, good news slides.
We are on track to meet production targets of 155,000 bbl-175,000 bbl of oil equivalent. As mentioned, net debt levels are expected to stay at around $2.8 billion. Cost of production, including royalties, at around $600 million. Development CapEx, mainly driven by the Cassiopea gas field development and the Katlan long lead items, to be around $400-$500 million. Our exploration/growth expenditure, returning back to more than $100 million, we guide around $150 million. $20 million already spent on the Orion well. We expect to spend around $80 million appraising the Anchois gas field in Morocco, and we have provided for around $20 million for CCS-related expenditure in Greece, which, for the avoidance of any doubt, is fully subsidized by the EU Recovery and Resilience Facility.
Finally, at decommissioning, we keep our $40 million-$50 million guidance until we finalize our decommissioning plans now that we're taking operating status in, in our decommissioning assets in the U.K. So bear with us until the next trading statement. We will be most probably pushing that down, as we always do, with our ability to push back some of the decommissioning expenditure. But so far, we for the time being, we keep the $40 million-$50 million guidance. So with that, Mathios, back to you.
Thank you, Pano. Let's go now through some of our key countries of operation. I'll start with Israel, page 15. Production ramping up. We expect 2024 to give 120,000 bbl-130,000 bbl of oil equivalent. The ramp-up has gone according to plan. Our FPSO has had 99% uptime in Q4 of 2023, and it continues to operate exceptionally well. We brought another well on stream, Karish North, successfully tested that to 275 million scf a day. We have four fantastic world-class wells that can produce more than what the capacity of the FPSO is today. We try to maximize, obviously, liquids, and we try to optimize our production to maximize cash flows. We've had eight liquid cargoes offloaded in 2023.
To preempt questions that I'm sure you will ask me after the call, we are still on plan to bring the M10 on the vessel later in the year, depending on the overall situation, and take the FID on Katlan. These are two projects that are, I would call, ordinary course of business. We are not making them major milestones. These are part of our ongoing production plan and our ongoing production guidance. Moving to page 16, I think this is a very important picture that we'll be using going forward that shows the ability to keep our plateau production for over a decade from existing 2P reserves. Katlan and Tanin, just 2P. I'm not referring to 2C or additional licenses that we have, and we haven't drilled, and we will be trying to bring more gas on stream.
Give us the ability to have a stable production that gets us all the way to 2035 and beyond, at peak rates from Israel of 150,000-160,000 bbl of oil equivalent a day. And this is going to be the bedrock of our business and the foundation of our future, cash flows and production. In addition to the existing discoveries, Karish, Karish North, the Katlan development and Tanin, we have also additional licenses which will give us the ability to find more gas and go to the next phase of growth for Energean in Israel. And, the next phase of growth is targeting a continuously improving and increasing demand for both electricity and gas. I'm now on page 17. We see and BDO, our consultant, see, continuous growth of gas demand in Israel.
We are seeing a delay in the decommissioning of coal-fired power plants, but there is a firm commitment, and I was in Israel last week by the government, to decommission the power stations fired by coal, to switch them to gas, and that will continue to create to grow gas demand from, from Israel. Beyond that, we see growth from Egypt that continuously needs more gas, Jordan, and the wider region. So I've said it before. I'm saying it again. We are a major gas producer in a region that needs a lot of gas. That's a fantastic position to be in, and it's now up to us to maximize our sales. And what we've shown from our commercial strategy is that we have been very successful in winning all four privatization contracts that took place in Israel. All four power stations were privatized by the government.
We ended up with buyers that contracted with us. So we know how to compete. We know how to bring security of supply and competition to the market, and we are very confident that we will continue to achieve more sales to fill up our FPSO in Israel and outside of Israel. Moving to Egypt. Egypt, page 18, stable production of around 30,000 bbl of oil equivalent a day, nearly completed, on time, on budget. We are now working with the government to merge our production licenses to streamline fiscal terms, extend economic life, improve our receivables collection. A very important development in the last period has been the massive support that Egypt has seen following the flotation of the currency, the IMF funding, the European Union funding that was signed last Sunday, and the massive investment happening in the North Coast.
So we do continue to see Egypt as a pillar of stability, a great country to do business. Despite the recent financial difficulties, we see this effort from the international community to support Egypt in this time as a huge push forward and a great vote of confidence for us and for the country. Moving to page 19 to talk about the other countries of operation, the biggest and most important development since we last talked from our trading update is the annulment of the PiTESAI, the law that prevented oil and gas activities in Italy. The Supreme Court in Italy has effectively canceled that law as being against the constitution, and now the country is open for business again.
We are the third largest producer of hydrocarbons in the country, and we believe that this will give us the opportunity to do a lot more in our existing assets, and we are targeting to increase production from Vega, from Rospo, and the other projects we have in Italy, but also to target the North Adriatic, to target exploration licenses, and make Italy a pillar of growth for us going forward. In the U.K., as Panos mentioned, we are going to be a qualified operator because we want to control our destiny. We want to control the decommissioning of the Southern North Sea assets, and we believe that with our operating team, we will be reducing significantly or pushing to the right, as well, the decommissioning costs of our U.K. portfolio. Last but not least, our Greece project, the carbon storage project, is progressing fast.
We made a commitment during COP28 together with another 50 oil and gas companies that we will become a major contributor to the decarbonization of heavy industries. The Greek government is supporting us with EUR 150 million from the RRF, and this is a project that is moving very, very fast and will provide a future for our Greek business beyond oil and transition from what it is today into a CCS project. Page 20, Morocco, our new country entry, 45% of the licence, the farm-in that we did with Chariot. A fantastic country to do business, great terms. ONHYM is a great partner. We are very close. I use the word imminent to make an announcement for the finalization of the approval by all the Moroccan authorities. We plan to drill a well in Q3 of 2024, the appraisal well that we need, and test it.
The beauty about Morocco is that it is a country that at the moment is burning a lot of coal. It needs gas to displace coal. So this is exactly our strategy: develop gas, displace coal, improve environmental footprints of countries. And beyond that, Morocco, as you can see on slide 20, is linked with Spain, the European gas market. So a development in Morocco beyond the local market has access to the big European market, a great place to do business. We will drill the well, and then we will be talking about development options, and we will look to fast-track this development. So, wrapping it all up, as I said earlier, Energean is all about reliable and predictable cash flows. We have proven that, we are stable. We are delivering on our promises.
that underpins our strategy to pay a reliable dividend in line with our stated policy, to continue the deleveraging to approximately 1.5 x. That's our target, and to continue growing the business. I'm adding a fourth one focusing on gas, decarbonization, and achieving our Net Zero targets. All of that is what drives us and what allows us to take the decisions for the future. So, in conclusion and outlook, 2024 is expected to be another material step towards our medium- and near-term targets. Our focus is on backfilling the FPSO, signing more gas contracts, selling gas to the region beyond Israel, developing all our assets at the best prices that we can get in the market, adding new areas of development through projects like the Anchois development in Morocco, Italy, the opening of the market, new projects in Israel that we will be targeting.
Our dividends will continue to flow in line with our policy. Of course, as we've always done, we will continue to evaluate all opportunities, to continue our policy of deleveraging, growing, and paying a stable dividend. We built this business on four M&A deals. We started with Prinos back in 2007. For those of you that have followed our story, we continued with the acquisition of Karish in 2016 at a fantastic price. We $48 million upfront and $100 million deferred. We continued with the Edison acquisition, $250 million. We recently did the deal with Chariot. So all in all, this team has proven that we do the right deal at the right time. We raise money at the right time when the markets are open to support our business. We are today a $ 2.5 billion market cap company starting from where we were a few years ago.
I'm very proud for the team that has developed all this. We have delivered on everything that we promised, and we will continue to do so. With that, I thank you and open the floor to any questions.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. To withdraw your question from the queue, please press star two. So again, that is star one for your questions today. Our first question comes from David Round from Stifel. Please go ahead.
Morning, guys. Thanks for the presentation. Could you start by just talking about Israeli gas demand so far this year versus your expectations? It feels like you're getting a pretty good handle on forecasting that number. But I'd just be interested in seeing whether there are still some moving parts there that surprise you. And also just as you roll into the summer, can you just remind us of the extent to which you expect production to grow with that increased demand in the summer months and how close that may or may not get you to capacity on the vessel?
Thank you for the question, David. The only unknown is the weather. And it's something that we experience all over Europe, all over the world. And Israel is no different to the rest of the world. So we've seen a winter which was much milder than expected, much milder than previous winters. That had an effect on electricity demand and an effect on gas demand. What will happen in the summer?
If we have the heat waves that some expect, we will be seeing huge gas demand during the summer months. We have tested the FPSO, especially when there were disruptions from other fields for technical reasons. So we are confident that we can produce at maximum rates. We will be doing all the preparation for the peak summer months, and we will be looking to maximize production during the upcoming months until September or October when we will go back into the low part of the season. What we are trying to do at the same time is enter into interruptible contracts that would fill the gaps during the periods of lower gas demand from our existing contracts. So we are moving, if you want, into a revenue management plan now, which is to try to sell every molecule that we can produce through that FPSO.
Are we testing the limits of the facility and the wells? I mentioned earlier we have three world-class wells that can do 270-300 million scf each a day. So these are fantastic deliverabilities. The reserves that I mentioned earlier, you saw the numbers, support our continuous business. So I'm not worried about having the reserves to sell more gas, and we still haven't drilled all our blocks. I'm not worried about the deliverability of the wells. The FPSO seems to be behaving exceptionally well. We have a good handle on the market, and now we're fine-tuning to produce at peak rates and maximize utilization of the FPSO. And I know that some of you are modeling us on the back of just the gas contracts, whether that's the, you know, the take or pay levels or the ACQ or somewhere in between.
But I think what we are doing and what we have proven that we can do is continuously sell more gas to reach the peak and get the maximum revenue out of both the liquids and the gas. And liquids is very important for us. Obviously, with the oil price today at $86, the 16,000 bbl of production that is coming out of the existing oil train that will increase when the second oil train comes on stream is an extremely valuable cash flow generation for us. So this is not just about the gas demand in Israel. It's about the regional demand and about the liquids as well.
Okay. Thanks. That's clear. Can I also ask just in Italy, the ruling there, is that now a final ruling or is that something that can still be appealed? If it is final, how quickly could you or might you want to ramp up activity in Italy?
Well, it's a question for the government if they will decide to appeal the decision of the court. My personal view is that they will not, but I'm not the government. I think it's a great opportunity for the government of Mrs. Meloni to open up the sector and bring more investment in the country. During meetings that we've had with the government, that's the sense I'm getting. But again, that's a decision by the government. I think they will use the opportunity that was given to them because I remind you this is a decision that was or a law that was passed by the previous government. So the existing government doesn't have any incentive to appeal it. How fast we will move? We've already moved.
Just in the North Adriatic, the gas release law that was passed by the government allowed us to book 20 BCM of 2C resources on existing licenses that Edison had and were frozen because of these laws. In addition to that, we've applied to increase activity in Vega and Rospo through extended reach drilling from our platforms to increase production from assets that are producing at effectively zero water cut. So we are sitting on assets that have a lot more production capacity that do not need a lot of investment, existing infrastructure, and you can increase production substantially. Last but not least, if you see our exploration acreage offshore Greece, block two is on the border with Italy. There is another block mirroring block two in Greece on the Italian side. Again, there is an existing application since 2018 that is frozen that is now open to be reawarded.
We are moving full steam ahead. My expectation is the government will not appeal. But again, as I said, this is a government decision. I think Italy is going to be a great place to do business.
Okay. Thanks. Understood. Really helpful. Thank you.
And by the way, I remind you that when we bought Edison, Italy was supposed to be the problem child of the portfolio where people were assigning negative value because of the big decommissioning liabilities that are coming. And we have turned it into a very strong cash flow generator and pushed all the liabilities to the future. We've taken over 100% of Rospo and Vega from Eni for free. We didn't pay them anything because they believed that we would have to decommission. And we are pushing now to make Italy another pillar of growth for our portfolio.
Got it. Thank you.
Thank you. Our next question now comes from Werner Riding from Peel Hunt. Please go ahead.
Good morning. Thank you. Mathios, yeah, just picking up on one of your final comments in the presentation on M&A. So just a question on inorganic growth. How do you assess the landscape at the moment? We obviously saw the ADNOC BP deal put on hold with uncertainty in the region. Are you currently open to the possibility of similar sorts of scale deals, or do you feel you've got enough within the business to achieve your longer-term goals at the moment?
Well, at Energean, we never have enough. We always look to continuously create value for shareholders. I mentioned earlier, we've done four deals, and they were all done at fantastic levels and prices. And we continuously look to do the next one. Do I have anything specific? No.
If there was something, I would be obviously forced to announce it. We are assessing both gas and other opportunities in the region. We are also looking at both acquisitions, divestitures, and everything that could add to our strategy and the four pillars that I mentioned earlier. The BP ADNOC deal that was, let's call it frozen again. I'm using the word frozen, effectively cancelled. I'm not surprised it happened. I always said that this was a difficult deal to execute. It's a country and a region that you need to be very comfortable with the geopolitics. We are very comfortable with the geopolitics. When you know how to navigate around those geopolitics, you can do some fantastic deals like we've done so far. I think we need committed companies, committed operators that know how to navigate around this.
We've been through some challenging times, both in the startup of our production in October of 2022 and the current war. As I said earlier, we're navigating without any operational disruption. That is the type of operator you need to navigate in these difficult times. You can make some fantastic deals. We are looking at everything, every country in the Mediterranean. You saw that we went to Morocco, strictly speaking, a Mediterranean country, but our business or our project is on the Atlantic side. We're starting to expand beyond the closed Mediterranean Sea, not too far out. What we are trying to always look for is the best deal for our shareholder that allows us to continue what I said before. Paying a stable dividend, deleveraging, and growing at the same time is not an easy task, and it needs optimization of the portfolio.
That's what we're continuously looking to do.
All right. Okay. Thanks very much. Just a couple of other quick ones. Panos, you've pretty much already answered my dividend question. So perhaps one on CapEx. You mentioned that peak CapEx is now behind you. So what sort of normal run rate level of CapEx would normal look like in future years?
Yeah. So this year, we're guiding around $400 million-$500 million on the development CapEx side. I think this number should stabilize, including some unknown for the time being, okay, numbers including the growth. So I would say without any big new development that right now we don't have in our cards. But as Mathios said, as we're expanding or as we're looking for opportunities, may come up, but it will not come suddenly.
The running rate, or at least the one that we are assuming, is that it will be including DCOM and including growth CapEx and development CapEx at around $300 million-$400 million. We may have some spikes as we expect to see. And for people that are looking at our CPRs, we may have some spikes with the Katlan development, which we expect to hit us at, I would say, end of 2025, beginning of 2026, most of the capital intensity there. But apart from that, these are the numbers we're looking if I were to run a forward-looking stable number.
Right. All right. That's clear. Thanks a lot. And final quick one, just on Orion. I know you can't say too much because it isn't announced yet, but a question on immediate next steps in the event of a discovery. Will you plan to drill an appraisal well, or does the rig go off contract, or will it move to testing? Or just when we see an announcement, what can we expect you to do then afterwards if it's successful?
Werner, I think you said we have to let the operator take the lead in making announcements of what happens. My comment today is that I don't expect any massive investments to continue until all the results are properly assessed. So don't expect that you will see a lot of activity around there, but we'll have to let the operator take the lead.
Okay. All right. Thanks a lot.
Thank you. And up next, we have Matt Smith from Bank of America. Please go ahead.
Hi there. Good morning. Thanks for taking my questions. If I perhaps just start with one following up on the M&A side of things, please. And I guess I just wondered, from an acquisition point of view, I don't know whether you're either targeting certain types of situations or perhaps whether you'd characterize better opportunities in relation to the stage of development of assets. So obviously, in Morocco, early stage of development, pre-production. Is that the sort of thing that we should expect you to do going forward, or do you see opportunities to execute on producing assets and cash flowing assets?
So that'd be the first question, I suppose, linked to that. Sorry if I could just tack this on. On M&A, in terms of potential disposals, would that only relate to sort of assets outside of Israel, or is there any possibility of perhaps farming down interest in Katlan, or is this very much an outside of Israel comment?
On the first question, and thank you for the question, Matt.
Look at our history. We bought in 2006 Prinos for $1 million. That was a producing asset, a mature oil field that was the start of our story. We bought in 2016 the discovered undeveloped gas, which was considered to be stranded in Israel for $148 million, the Karish-Tanin acquisition. So that was a stranded, undeveloped gas field. In 2019, we bought Edison, which predominantly had producing assets. In 2023, we bought a stake in an undeveloped gas field. So you can see the pattern, which includes both undeveloped gas, which is clearly our focus, but also producing assets when the deal is right. So our focus is on creating value and doing good deals. Clearly, gas is the focus, but oil also makes money these days. So as long as we keep our predominant gas mix, we will look at every other opportunity.
On disposals, we have done something extremely unusual, and I think we are unique to have 100% of a massive development. I don't know if there is a precedent of a company doing 100% development of an offshore deepwater gas field without any partners. People didn't believe that we would be able to execute. People didn't believe that we would be able to develop and produce gas, and we've done it very successfully. So we like being in control. We like being in operator positions. We operate pretty much all of our assets except from Cassiopea. So again, you see a pattern. We like to be in control of our destiny rather than paying just the bills, the very expensive bills that majors send to us.
Disposals of Israel and Katlan are not at the moment on the cards because these are fantastic assets that are extremely difficult to replace. It is very rare in this world to find a well or a field that can do 300 million scf from one well in an OECD country with a great, stable economic environment that pays well and has very limited credit risk on the other side. A lot of the countries where these types of developments are happening are very unstable from a political standpoint. I know that there's a war going on in Israel, obviously. But despite that, the country continues to work, continues to operate, continues to burn gas and produce electricity. So it's a fantastic asset. So the answer is, at the moment, there isn't any discussion about reducing our stake in Israel. We are very committed to the country.
We are very committed to the next phase of development of our existing assets, and we're very committed to finding more gas from the other blocks that we haven't yet started to talk about. So there's a lot more to do in Israel for us.
Perfect. Well, thank you for the clear and detailed answer. Then if I could ask a second question, you obviously alluded to the importance of the liquids as well in Israel and touched upon that second oil train, hoping to get that in place as soon as feasible. So would you mind? Sorry. Am I able to ask if you're able to add any color to that, perhaps a bit of a?
Yeah.
The question, really, what the current impediments are and therefore what your expectations might be on timing. But I appreciate this is an uncertain situation, but any detail might be useful. Thanks.
Absolutely right. I'll give you the pictures of today. The situation keeps changing as the situation changes in the region. As of now, we are targeting to lift the module, which is already in Cyprus. We've moved it out of Dubai, where it was, to lift it on the FPSO during the first half, commission it during the second half, and have it fully operational probably towards the end of this year or beginning of next year. That's the plan. What I think I led to with my introductory comments is that from now on, you will hear us be a lot more corporate rather than operationally focused. For us, what is important at the end of the day is to meet the production guidance of the 155,000 bbl-175,000 bbl a day, regardless of where this oil or gas comes from.
Of course, during the year, we will face operational issues. We will face geopolitical issues. We're here to deal with them and deliver, ultimately, the cash flows that will allow us to deleverage, pay the dividend, and grow. Whether this comes from the M10 or Italy or other countries of operation or increased production in Israel, I think that's where we need to start to focus on rather than the micro item of the M10. It is important. It is, as I said earlier, planned to be lifted because we want the liquids. But this is not the critical factor for our production guidance for the year. It's not going to make a material impact to the 2024 numbers.
All right. That's very clear. Thanks very much for those answers. Happy to pass it on. Thanks.
Thank you. From Investec, we have Alex Smith with our next question. Please go ahead.
Yep. Morning, guys. Thanks for the call. You mentioned potential export opportunities in the release for Katlan. Is it Cyprus and Egypt that you mentioned before? And can you maybe give a bit of color on potential pricing upside you could achieve from that, just given current markets?
Well, Alex, Egypt at the moment needs as much gas as it can get. There are power cuts every day in the country because of the lack of gas supply. So an export permit to Egypt and a midstream capacity, which is the other big challenge, would allow us to tap a huge market that has local consumption that can absorb all the gas that we can produce and has also the export capacity through the LNG terminals to export gas to Europe.
So I think as of now, there is a huge incremental demand from Egypt and also from the rest of the world through LNG. So in terms of molecules, if we can export, and we can export Katlan, and that's our key target. I remind everyone, Katlan does not have an export limit and does not have royalties to the previous sellers of the assets. So it's a great asset to develop ahead of Tanin. It brings to us the ability to export and not pay royalties to the royalty holders. In terms of price, the regional gas price, the net back, because you have to add the midstream and the transportation through the pipelines, either through Jordan or through the new Nitzana pipeline that is being discussed to link in the bottleneck of the system, will be higher than what we see in Israel today. How much higher?
I have to pass on that question because we will need to be able to negotiate when we have the export permit from the Israeli government. So this is for Katlan. We don't need to export today because we have already enough demand in country to sell as much gas as we can produce. So we're targeting the Katlan gas to go to the wider market. Cyprus, that you mentioned, is an interesting story. It's a country that have tried to do business, and they are still, and this is public information, in arbitration about an FSRU when they could have had gas flowing either from their own fields or from us in Israel. I don't want to say more. It is for the Israeli government, sorry, the Cypriot government, to decide what energy policy they want to follow. For the time being, they're burning fuel oil.
We have a solution for them. We're very happy to pursue it. But coming back to my previous comment, Israel is a fantastic country to do business. Buyers are very solid. We get paid on time. We don't have any payment issues. We're dealing with the private sector. We're not dealing with governments. So it's a great place to be selling our product. And Egypt, as you know, has its own financial difficulties. I think it's going to improve after the deal that is happening with the IMF and the European Union and the devaluation of the currency. But still, it is a country that has its own issues when it comes to payments, which we know very well. So all in all, selling gas to Israel is a top priority for us.
But we will look to increase or improve returns from any opportunity in the region, whether that's Egypt, Cyprus, or the wider Southeast Med area, which needs a lot more gas. And with the push to move further away from Russia as the other war continues to develop, I think there's going to be more push for diversification of gas sources from the European Union. And the East Med can play that role. And whether that is from Israel, Cyprus, or other countries, I think that is the next big development that we are targeting because we have now got a big project behind us, and we are hungry to do more and be the player that can bring the gas to the region and Europe.
Understood. Thank you very much. Thank you. And as a brief reminder, that is hour one for your questions today.
We're now moving to a question from Ruben Devine from Jefferies. Please go ahead.
Hi. Good morning, guys. And thank you very much for taking my questions this morning. I just wanted to check on the medium-term targets. So you say that you're firmly on track to the 200,000 bbl of oil per day. I just wanted to get a sense on the timing for this. As I think previously it was communicated, this would be around the second half of 2024. Just wanted to see if that still stands, or is it looking more like the first half of 2025? And just following on from this, is the intention still therefore to then step up the dividend to roughly $100 million per quarter? Thank you.
Mathios Rigas, yes.
Yes, Pano. Thank you.
All right. Okay. So as communicated before, yes, obviously, our medium-term targets have not changed. That's why they're reiterated. The timing of us reaching the 200,000 bbl a day is linked to the Cassiopea gas development that, as explained, for the time being, it is on track, and that's what the communication from the operator and I is. The oil train, as long as it is commissioned in the second half, which is the last part of the equation outstanding from the projects launched a few years back, it should get us to the 200,000 bbl a day.
Now, if that is Q4 or Q1 2025 on a running rate, we cannot be that specific today. What I have said, and I said that in January trading statement as well, is given that the key metrics for us to increase the dividend are linked to the leverage, the production, and the profitability, we expect those to be met somewhere between Q4 and Q1.
We are not in a position to be specific because it's still a moving target. But our targets of leverage below 2x on run rate, we don't expect to have behind us a full year for that to be recorded. The EBITDA of more than $1.5 billion, again, we won't wait for a full year to be recorded. We're just going to be looking at the run rate for at least a quarter. And finally, the production rates. So we are close. I don't think we should be calling them anymore medium-term. But unfortunately, since the projects are still going, we can't be more specific to the specific month or quarter.
Thank you very much. Appreciate it.
Thank you. And I'd now like to hand the call over to Owen to take questions from the webcast. Thanks, Saskia.
And before I pass back to Mathios for closing remarks, we have a few questions from Anna Kushnir from T. Rowe Price. When do you expect gross debt to peak, and how are you planning to address Energean Israeli 2026 bond maturity?
Okay. So we are confident that the gross debt has roughly peaked. We are making use of the RCF if we need temporarily to meet some working capital mismatches. The net debt is the number that we are tracking more closely. We don't see, given the projects that we have launched or expect to launch in the next few months, such as Katlan, to need to increase the gross debt. And we definitely see no visibility of increasing the net debt.
Finally, regarding the 2026s, as we said on the roadshow for the 2024 notes that we refinanced, we expect these notes to be the last that are getting refinanced. The exact amount, we're still doing the calculations. It will be communicated around September, and they will be linked to the ultimate and final cost of the Katlan development. We expect to be going into the market and assessing our chances to get good access to the market towards the end of this year or most likely first quarter of 2025. We won't wait until the last minute to refinance. We do have, however, another two years ahead of us for the maturity of the 2026 notes. But as always, we'll try to be proactive and make sure all investors, both equity and our bond holders, are not surprised by whatever we plan to do and we're actually doing.
The final question again from Anna. Could you please comment on what is happening with the prices in the Israeli domestic market?
What is happening is we are stable. We have long-term prices in our gas contracts, which are obviously on an individual basis confidential. The average prices that we're seeing are as per our contracts. We have hard take-or-pay provisions with floor prices that underpin all our contracts. The average price is in the range of $4.2. That's roughly where we are. It continues to evolve based on inflation and the way that calculations are done in Israel. We chose a very different model from day one, from 2018, when we started to talk about this project. We chose a model that doesn't have exposure to commodity price fluctuations. So the prices in Israel are stable. They're moving up, not by a huge amount.
We are complementing our long-term prices with spot prices, and we've signed contracts to sell at spot prices, which are higher than the long-term price, obviously. So nothing much is happening. And I think that's one of the good things about this business and Energean. Reliability, predictability, and stability are very unique, I think, and very welcome in our business. Usually, we've seen companies go up and down depending on where oil prices move. We have a different model that is based and underpinned by long-term gas contracts. So prices, I don't expect them in Israel to move substantially based on the fact that we have locked those prices in for the next 15 years.
Mathios, just to clarify for the avoidance of any doubt, the numbers that Mathios quoted was on a BTU basis. On a cubic feet basis, it's around $4.4 to keep it consistent with what we are reporting. In Israel, that was the average price recorded in 2023. And just to reiterate what Mathios said and what we said, what we disclosed earlier in the year with the new contract, we expect this price to be a little bit higher this year, taking into account what obviously was said about the dynamics of the market.
Thanks, Panos. Those are all the questions. So Mathios, if you have any closing remarks before we close.
Thank you all for participating today. As I mentioned multiple times, we are continuing to deliver on our promises. We're continuing to provide our investors with a stable dividend, and we're continuing to assess opportunities to improve and grow our business. That's what Energean is all about. Look forward to another great year. Look forward to seeing you all in individual meetings and having another great year of growth beyond what we produced today. Thank you all for being with us today.