Hello, and welcome to the Energean half-year results call. My name is Saskia, and I will be the 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.
Good morning, everyone, and thanks for joining our call today. I would like to start with some highlights and key points from our results for the first half of the year, which has been a fantastic six months for us. We are seeing record production and growth, and monthly production at the moment is over 177, close to 180 thousand barrels a day. I'm truly honored and very happy to be leading the organization that has grown so fast and delivered on what we promised. First half production increased to 146 thousand barrels a day. That is over 38% increase from the previous period. Quick update on Israel and our operations.
Everybody knows we are in a challenging geopolitical situation with a war going on, but this has had no effect on our operations so far. The uptime of our FPSO remains at a remarkable, very high level of over 99%. The machine is working exceptionally well, and demand in the summer was very strong, as we expected, so we've been producing at maximum rates throughout the summer. Of course, these great numbers turn into a very strong financial performance that Panos will elaborate on, but the highlight was $867 million group revenues, up 47% year on year. EBITDAX also $568 million, 65% year on year, and a very strong liquidity of over $500 million at the end of June 2024.
In terms of our other operations, we've delivered on all the projects that we promised at the beginning of the year. Cassiopeia is on stream. Our operator, ENI, delivered in the summer, as we promised. Location B in Egypt came on stream in a record time. We took FID on Katlan to continue the development of our asset base in Israel, continue producing more gas and filling up the boat, filling up the FPSO for the decades to come. We signed new gas contracts. Despite what is going on around us, we secured another $2.4 billion of revenue from gas contracts in Israel, when others are trying to figure out how to bring gas to the shores of countries that are still burning diesel. In Morocco, our operations are continuing. We will be updating everybody once we have results. We have started operations.
They will be finished shortly, and when we have full results, we will give a full technical update. Preliminary results are not as we expected, but this is not a material business for us at the moment. On our big transaction, on Carlyle, a transaction that is transforming Energean again, we have made material progress on all fronts. We have an unconditional clearance from the Italian Competition Authority, and in record times, we received the final approval from the Italian Presidency of the Council of Ministers for the Italian Golden Power Law, opening the road for the final approval by the Minister, followed also by the approval from Egypt, which we expect to be coming shortly, so we can close before the end of the year. If you remember, every time we speak, I insist on our disciplined capital allocation approach. We are continuing to deleverage.
Our leverage has reduced to 2.5 times and will continue to reduce following the Carlyle transaction. Also disciplined to our dividend policy, we have declared today a $0.30 per share dividend in line with our dividend policy. We are on track to deliver what we promised, $1 billion back to our shareholders by the end of 2025. And all of that in an ESG and sustainability environment where Energean is leading. Our emissions have continuously been reduced. We are now down to 8.5 kilos of CO2 per barrel of oil equivalent, Scope 1 and Scope 2, a 20% year on year reduction. We are making great progress on the carbon storage project in Greece, which is a project that will take the Greek asset into the next decades.
All in all, KPIs for us, and these are numbers that we will be tracking and we'll be sharing with all of you, 154,000 barrels of oil equivalent, 8-month average production, $867 million of revenues, over $500 million of EBITDAX, 2.5 times leverage, and $486 million of cumulative dividends so far to our shareholders, and we are continuing. As I mentioned, all of that in a great environment of sustainability. With that, I would like to pass on to Panos, our CFO, to walk you through the updates on Carlyle and more details on our financial results. Thank you.
Thank you, Mathios. Good morning, all. Moving to slide 6 of the presentation. A quick recap of the transaction announced early summer of the sale of our Egypt, Italy, Croatia portfolio to Carlyle. It's been a busy summer, as Mathios mentioned. All submissions for approval to the relevant jurisdictions have been submitted. Carlyle got already the Italian Golden Power approval and the clearance from the Italian competition authority, and we are on track to receive the remaining approvals from Egyptian and Italian authorities by end of 2024, when we are targeting closing. Upon closing of the transaction, we expect to receive $504 million of cash consideration, between $100-$200 million of 2024 working capital adjustment.
Just to clarify this point, because we had a few questions, this is a reinvestment, dollar for dollar, for the funds we estimate to inject during 2024 in the perimeter of the assets that are being sold to Carlyle. The expected use of funds that we take up front at closing are, as a priority, to repay fully the $450 million bond outstanding at PLC level, and up to $200 million of special dividend, as announced previously. But that is not all.
In addition to that, we have deferred consideration that is structured as a fixed six-year vendor loan, accruing interest of north of 7% over SOFR going forward, of 139 million, and contingent payments up to 125 million linked to Italian production, Brent and PSV prices that are being monitored for the period from 2025 to 2028, four-year period. Finally, there is an uncapped contingent payment linked to the additional reserves that we found and discovered in the location B, and are subject to an independent auditor reserve certification. Moving to slide seven, we need to emphasize here that despite the size of the transaction, the number of assets that we're exiting through this transaction, Energean retains a significant part of its revenue stream, profitability, production, reserves.
More specifically, as you can see on slide seven, more than 70% of the production rates are retained, around three quarters of our revenue stream, more than 85% of the reserve base. And I want to emphasize here that the assets that we hold have the longest reserve life in our portfolio, and finally, more than three quarters of the profitability, the EBITDAX, recorded so far this year. Moving to slide nine, just a split between the group results and what we call now the continuing operations. Repeating a bit what Mathios outlined in his opening statement, this was undoubtedly the best financial period recorded in the Energean history, with all metrics improved massively year on year, and especially in the perimeter of assets that stay with us post the transaction.
You can see that sales improved by close to 50% year on year, but 70% in our continuing operation in Israel. Of course, we need to emphasize here that those revenues, 60% of those, are protected for the next 14 years. That's an average life of our contracts with floor price mechanism that protect the downside. But the rest, especially given the oil production in Israel recorded, we have 40% of those revenues that are enjoying the upside in commodity prices. But this is not only sales. You can see that the profitability, the EBITDAX, increased even more than that at 65% of group level, and within the continuing operation, 90%, close to doubled.
The operating cash flow [saw a] 126% increase from $233 million to more than $500 million, and you can see that this is mostly recorded within the Israeli operations of the continuing operations. The capital expenditure, as we guided in the beginning of the year, we have launched now Katlan and Cassiopeia, and the Italian assets got into the most capital-intensive period in the first nine months of this year, hence the increase in the capital expenditure. Finally, a key metric that we're emphasizing is the leverage. We continue dropping down to 2.5. I remind you all that only 15 months back, that leverage ratio was at six times leverage.
The net debt has stayed pretty much flat, and we expect to stay within the same levels, even though we're turning back into a capital-intensive period with the Katlan development at full stream currently. Moving to slide 10, please. We are committed, as, as we said, to the four pillars of our capital allocation strategy: stable and predictable return to our shareholders via quarterly dividend stream of $0.30 per share per quarter, which we expect to reach at $1 billion total returns by end of 2025. Second pillar, extremely important, is the deleveraging, and the track record so far since late 2022 has been consistent. We're dropping down to 2.5 from starting at more than 3 this year. Again, our target is to drop and stabilize at below 2 times leverage.
And of course, the priority of the use of funds from the sale of the Italian, Egyptian, and Croatian assets is gonna be the repayment of the $450 million bond. Finally, I want to emphasize that post that repayment of the bond, the average life of our debt will be well above five years. Energean has plenty of organic growth opportunities in its remaining portfolio, with the Katlan development already underway, but with the Arcadia and the Hercules areas that have already been drilled and discovered in the past, next to be fully appraised. Finally, we will not deviate from our disciplined and opportunistic approach to M&A that has resulted in big successes for us so far.
We want to be in a position to screen all opportunities in the wider EMEA region, and if there is an asset or company that meets both our risk appetite and return criteria, to put forward a credible offer. However, we want to emphasize here that will not be at the expense of any of the above, and especially the returns to our shareholders and the deleveraging. Final slide from me, and that is the revised 2024 guidance, which I don't expect anyone to be really surprised. As Mathios said, we are on track on all metrics. Our production will be at around 155-165. The small revision is just to reflect the slow and the soft start as recorded in the first four months of the year.
We are catching up with a very strong summer in Israel, but we will need to revise the upward part of the guidance slightly. In terms of the net debt, we're adding $100 million. Again, I don't expect that number to be that different to what we're recording today, but we see a lot of milestones being met much faster by our contractors in Israel, especially with the Katlan development and the M10 lift. So we just have a buffer in case those milestones continue being met ahead of schedule. Which is good news, because the development that is key for us, and we want to keep everyone happy and paid for the good work they do.
In terms of cash cost of production, we expect this to be lower, and this is a combination of lower royalties in Israel, but a true reduction in costs that we see in Israel and Italy, and the team is doing a fantastic job to keep those costs under control. In terms of development, the only increase we're recording here has to do mainly with acceleration, not a cost overrun. There are a few dollars that we have to spend more to give to ENI for the Cassiopeia startup. That has resulted in a few increases in costs, but nothing material. In terms of exploration, you will see that this is roughly the same as guided, and we will wait to see the Morocco well, what is the final cost, but we don't expect any increase.
If anything, we think we're gonna stay within the initial guidance. And finally, we're not in a position to revise the decommissioning expenditure, although it looks like we will be undershooting that by roughly five to ten million. So that's for me. Mathios, back to you.
Thank you, Panos. I will turn to page 13, and going forward, obviously, I will focus more on the remaining perimeter, Israel. Israel is going to be obviously dominating our business going forward until we make our next move. Focusing a little bit on Katlan, and we're giving today a picture so that everybody can understand what the Katlan development looks like. Subsea tieback of two wells back to our FPSO, which is proving our investment case and the reason why we built and own this FPSO. It allows us to tie back small... smaller accumulations like Athena and Zeus. 26 BCM will be tied back with a system of pipelines, subsea, for a total CapEx of $1.2 billion. The contract has been signed with Technip, so we have great certainty of execution and cost. So no uncertainty.
There is an EPC contract that gives us the confidence to show those numbers. This also is a pre-investment for the future development of Tanin. So the $1.2 billion includes the MEG upgrade and also pipelines that will be used also for the tieback of Tanin. So it's part of the overall investment thesis that we presented to our investors, even from the IPO days. It's a project that will allow us to continue to sell market, to sell gas into the Israeli market, and I now turn to page 14 to go into a little bit more detail about what we're seeing in the Israeli gas market. Continuous growth, continuous growth of electricity generation. The outlook is that we will have reached over 160-170 terawatt-hours by 2045. Israel gas demand is continuously growing.
We see growth of over seven BCM, driven by additional electricity demand, coal reduction, industry use, and a demand that will reach over twenty BCM by the end of the decade. So we are selling gas into a market that needs gas, and on top of that, obviously, there is the export markets of Egypt and Jordan, and potentially Cyprus, that need a lot of gas. At the moment, and everybody knows, Egypt is importing LNG cargos because there's not enough gas in the region. So it's a great place to be. Selling gas into a market that needs gas is a fantastic opportunity for us. What has been the effect of the war on electricity demand in Israel? A lot of people ask me, "What's going on in the country?" I go to Israel very often.
Life continues, and as you can see from the bottom chart on page fourteen, electricity demand, June 2024, was 16% higher than in what it was a year ago, before the war started. The economy is continuing, electricity demand is continuing. There are additional power stations that will be licensed by the government, so the market is rock solid. Obviously, we have the effect of the weather, and you can see that in the pattern. We are learning also the market as we've been now in operation, and we see the shoulders in the winter months.
And our number one target for twenty twenty-five and beyond is going to be what we can do with our commercial team, that's doing a phenomenal job, winning every contract in the market in Israel, to fill up the low months with interruptible spot sales and normalize this graph so that we continuously fill the boat. I turn to page 15, because a lot of people ask me: "What is Energean gonna look like after you sell Karish? You're gonna have 99% of your business in Israel, and the risk is too high. You are concentrated." Well, my view on this is we were exposed to a major asset, to a world-class asset anyway, and nothing is really changing from a risk perspective. So what does Energean look like going forward?
Very solid foundation of the Israeli asset, of Karish, Tanin, Katlan, and later, Tanin, producing continuously at very high levels for the next decades. A reserve life of twenty years. Not many E&P companies in the world can claim that they have a twenty-year reserve life from a world-class asset that is producing at the great rates we see today. That is the bedrock. That is the foundation that allows us to continue to return money to our shareholders, and we may end up being a nice, stable, dividend-paying story that returns continuously money to its shareholders at a great yield, and that's fine. We will be very happy to do that, but that is not in our DNA, and I turn to the last page of the presentation today, page 16, to remind you all how we got to where we are.
Prinos acquisition, 2007, less than $1 a barrel. Karish Tanin acquisition, 2016, $0.5 a barrel. Edison acquisition, $1.2 a barrel. Chariot's investment, and of course, the last deal that we did, selling our Egypt, Italy, and Croatia assets for $5.4 per barrel. I think this track record demonstrates what our focus is, what our focus is going to be, and what kind of value creation we intend to bring to our shareholders. We see opportunities, we will take advantage of them, but as Panos said very correctly, not at the expense of returning money to shareholders and keeping the disciplined capital approach.
So all in all, a very safe investment case with cash flows coming from gas assets underpinned by long-term gas contracts, with the upside coming from a management team that has consistently delivered value to the shareholders through unique acquisitions that we were able to do, and disposals like the one we're doing today to Carlyle. With that, I thank you for your attention, and I would like to open the floor to any questions.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question over the telephone, please signal by pressing star one on your telephone keypad, and up first, we have a question from David Round from Stifel. Please go ahead.
Morning, guys. Good to see the pickup in Israel demand over the summer. Can you just talk about or elaborate on, because you did mention it in one of your slides, Mathios, on how you expect demand to look over the remaining months of 24? Because it still looks really hot in Israel, so are you still seeing that elevated demand? Is there any reasons for the remaining months of the year to be optimistic around that side of things? And then, is there any maintenance going on that we just need to keep in mind for the remainder of the year, please?
... Thanks for the question, David. Yes, we do see a very hot summer, like we see in the whole of the Mediterranean. So September is going to be strong. October is going to be a month where Israelis go on holiday, so naturally, we will see a lower demand, as always. I can't predict what the weather is gonna look like in November, December. I think it will follow. We expect it will follow the normal pattern of lower demand.
What we're trying to do, as I said earlier, is to normalize through spot sales and taking advantage of the huge demand that exists in other countries, that is absorbing all the gas that Tamar and Leviathan can produce, to fill in as much of the shoulder that we see in the lower months. In terms of maintenance, the one thing that I didn't mention earlier, and I'd like to do it now, is the famous M10, the second oil train. We have contracted the lift to happen in the coming months. M10 is continuing, or it will be installed in the coming months. That will require a few days of safety shutdown because it's a heavy lift, and we are obliged to shut down, so we will see a few days off, but that's scheduled.
Nothing more than that. We will have the second oil train on the FPSO. It will take a few months to commission it, and then we will be able to increase our liquid production. One thing that we need to mention here, and I think that's very important, is that our revenues, as you saw from Panos's numbers and slides, show more than 30% of the revenue coming from liquids. Oil and gas, gas is obviously contracted at the fixed prices, but we do see a lot of money coming in and cash flow coming in from the liquid streams. The second oil train will definitely help us improve and increase on that, normalizing also our cash flows.
Maintenance, nothing major scheduled, nothing unplanned, obviously, except from the M10, and during that shutdown, we will do other maintenance that we need to do. We see very strong demand coming, but the weather is something we cannot predict.
Okay, great. And secondly, you talked earlier about gas contracts being key to smoothing out the seasonality, new gas contracts, I guess I'm talking about. Can you say what that market is looking like at the moment, and if there are any contracts coming up for bidding?
There are three new power stations that the government of Israel will be licensing. We have to be very careful, obviously, with our existing contracts. We don't want to over-contract, but at the same time, we want to make sure that if our buyers are not buying all the gas that is allocated to them under our contracts, and we're left with spare gas, we can put it in the market. That's exactly what we did during 2024. We signed the contract, as I mentioned earlier, that secured another $2.4 billion of revenue. We have new power stations coming up. We have, as I mentioned earlier, Egypt taking up a lot of gas, obviously not from us, because we cannot export today. We're starting to see the region, not just Israel.
When you see Egypt importing more than seventeen cargos of LNG to meet their gas demand, you can understand how much gas the country needs. There are continuous power cuts in Egypt every day. I was there a couple of weeks ago, and there are power cuts every day because of lack of gas supply, so all of us, and this goes to all three producers in Israel, Leviathan, Tamar, and us, need to be producing as much as we can to meet the regional demand. The commercial team will do its job to normalize the shoulder months, so spot sales in Israel, interruptible contracts that we can go for, and potentially new contracts, provided that we have enough gas under our existing contractual agreements, is where we see incremental demand.
We are making a choice also, David and everyone, to sell more gas to the Israeli market. We like the stability. We like the credit quality of our buyers. We like to be paid on time. Receivables of our business in Egypt have exploded because of the situation, the financial situation in the country. We like to be paid on time. It's great for an E&P company to have stable cash flow, as opposed to be waiting for receivables to be repaid. So Israel is a great place to do business, despite the geopolitical situation, despite the war. And you know me well, I never take sides on, politics. This is not our business. We produce gas into, a market that needs, gas. And that is where, we like to be.
Okay, thanks. That's very clear.
Thank you. And we're now moving on to our next question, which comes from Werner Riding, from Peel Hunt. Please go ahead.
...Thank you. Morning, Mathios, you more or less answered it just now, but you mentioned you're planning on redefining your dividend policy at transaction close. So I won't ask you about how you look to calculate it, but can I ask if the intention is still to remain as one of the sector's leading dividend payers, which I believe has been a long-term objective? And within, I suppose, your overall capital framework, capital allocation framework, could there be room for opportunistic share buybacks within this to take advantage of moments of weakness or will shareholder returns come by the way of dividends only?
If you're asking me as a shareholder, of course, I would like, and I intend to make sure that the management team continues to recommend and the board to approve, the dividends that, we've been paying and we've been promising. And we do like the fact that, this company has a full alignment between shareholders and management. And, the answer to your question, Werner, is yes, we intend to continue. Now, redefining the the dividend. I don't think there are many E&P companies that can claim that they've they've delivered $1 billion of dividends in such a short period of time, from the day we announced our dividend policy to the end of 2025. And I think that is a matter of credibility, also, that when we say something, we deliver it.
Now, I cannot tell you what the board will decide and how we will redefine the policy, but the intention is clear that we will maintain and try to increase the dividend coming from our operations. And that has to do a lot with balancing the pillars that Panos mentioned. We don't want to be over-leveraged. We don't want to do the mistakes that other E&P companies did, that they grew, they over-leveraged, and then they disappeared. So we have to be very disciplined. We want to grow, and I mentioned very clearly that we are targeting M&A opportunities, but they have to be at the right price. We are not the kind of company that does M&A for the sake of saying we did a deal. We are the kind of company that does deals only when there's value creation.
And we want to make sure that we continue our great operations in Israel with Katlan and Tanin and the rest of the opportunities we have, because we also have Arcadia, another area that has received a development lease recently by the Israeli government, that we're working on the continuation of our development of resources in Israel. So there's more. It's not just Karish, Tanin, Katlan, there's also Arcadia coming. So there's a lot more gas for us to develop out there for the future. Now, share buyback and dividends. I get that every time. And we've been consistently saying that we are going to pay our dividends. If people think that this is an undervalued stock, our view is, we give you the money, you can go buy the stock. And then every shareholder can take their own decision what they want to do with Energean.
We have been consistently saying that. We've consistently said that we pay dividends, and we don't believe that short-term gains of the share price, reducing further the liquidity of the company, is for the benefit of the shareholders. That's our philosophy. We've been consistently saying that, and I repeat it again.
All right, thanks. Clear. I might have missed your comment on total Katlan CapEx, but the number of 1.2, I think that remains unchanged. And so the increase this year is more of an acceleration rather than a total increase. That, that's right, isn't it?
Absolutely. The $1.2 billion remains unchanged. It is an EPC contract that we signed with Technip. So we are very confident they've delivered on all the projects for us. They've delivered in, Egypt, they delivered in, Israel, so I'm sure that Technip will deliver again, on time and on budget. There is an acceleration, and the reason for the acceleration is that we want to meet our timetables and our schedules and our commitments to our buyers, and be able to sell as much gas as we can. So yes, CapEx remains unchanged, but we chose to accelerate to, bring gas faster on stream.
Okay, thanks. Got it.
Thank you. And from Berenberg, we have James Carmichael with our next question. Please go ahead.
Hi, morning, guys. A couple from me. Just firstly on the, the second oil train. I was just wondering, what's changed, I suppose, there, that's enabling you to sort of get that installed? I think the question has always been around, insurance and getting heavy lift vessels into the country, given the, the backdrop there. So just yeah, interested in what's changed to enable that installation. And then you talk about 25,000 barrels a day of oil production in the second half of next year. Could you just remind us, on the overall capacity? And then just one on Anchois, the well result, obviously this morning, didn't read particularly well.
If we look at sort of what Chariot have put out, it suggests that a lot of the upside that you were looking at has sort of gone, so and then there've been mixed messages around the primary sort of appraisal target, so just wondering on your sort of overall view at the minute, are you starting to maybe be concerned about the overall commerciality of that, based on the initial data? Thanks.
Okay, three questions then. Second quarter and insurance and security. We are working in a challenging environment, and we are totally confident on the Israel security system and the Israel Defense Forces. We work very closely with the government, and they gave us a window that they felt it would be comfortable to, and secure and safe to do this. Also, I remind you that this is, I mentioned, the next month. October is a month of holidays, less demand, so it's a good month to do a shutdown, to be able to do the lift. So it's a combination of the appropriate security situation, and operationally, the right window for us to be shutting down for a very short period of time to do the lift safely and do the work.
Capacity, you're right, we're mentioning 25,000 barrels. The total installed capacity will be higher, but I would like to come back when we have installed, when we have tested, and when we have seen oil flowing at maximum rates, to talk real numbers rather than expectations. I'd like to be conservative on this. Morocco, Chariot made a much more detailed announcement than us. As we said, we are continuing the drilling operations, so I don't think it would be appropriate to give results before we have finished the well, before we have done all the assessment. At the end of the day, the commerciality or not of a development depends on the gas price that is available for the development.
So there is gas there, as we are saying in our RNS, not as much as we hoped or as we expected, but the commerciality or not will depend very much on the type of development and the negotiation we will have to have with the Moroccan government about gas prices. So I think it's early days. I will not comment any further. I think, it's only appropriate to wait for operations to finish, and then, of course, we will update the market as we should. Today, we gave everybody a heads-up, based on what we've seen so far. But it's early days, we have to finish the work first.
Perfect. Thanks a lot.
Operator, are there any more questions?
We'll move over to a question from the client portal. So first question from Henry is, "Well done on the results. The question from me: it appears the CapEx forecast for the year for the continuing operations has increased. Does this mean that next year it will reduce by a similar amount?
We're not... Let me, let me take that one, yeah. We haven't completed yet the 2025 stream of milestones to be met, so I don't want this to be specific, that 2025 will be reduced by 60-70 million. I want to emphasize here that 20-30 million are linked to the Cassiopeia, not to the Katlan. But let's assume it's 60-70 million acceleration of Catlan and M10. Some of it, or most of it, will be offset by 2025 guidance, and some of the remaining in 2026. I remind you that the Katlan is a two-and-a-half-year project, expected to be brought on stream early 2027. So I cannot be too granular about 2025, but yes, we will be catching up in the next two years.
Okay, great. Thanks. I think we've got a couple more questions from the conference call, so I'll hand back over to Saskia.
Thank you. And our next question comes from Matthew from Bank of America. Please go ahead.
Hi there, yes, good morning. Thanks for taking my questions. Perhaps if I just start with one, would be around, you talked on demand already, and particularly in the wider region and in Egypt. Obviously, short of gas, very much in need of gas. So I guess my question was really around, infrastructure and your ability to meet, markets outside of Israel, noting that Katlan doesn't have restrictions on whether it can be exported or not. But or perhaps, you know, linking to your comments earlier, is that less of a priority for Energean at the moment, if there's satisfactory, demand in Israel to service? That would be my first question, please.
That's a, that's an excellent question. Thank you. Infrastructure, what we have today, we have the EMG pipeline, which is full. We have the pipeline that goes through Jordan, which has capacity, and we have a new pipeline, the Nitzana pipeline, that is being proposed and will be built, that will debottleneck the system between Egypt and Israel with more capacity. We are actively looking to book capacity in this new pipeline to be able to export gas when and if we see that the conditions are appropriate. You picked up, very correctly, my comment, that we prefer to sell gas to credible entities that will buy gas today. I don't know how long it's gonna take to build the export pipeline.
I don't have a specific schedule so far, but that will create the net infrastructure that will allow us to export more gas or gas to Egypt. We also have submitted long time ago a proposal to Cyprus to lay a pipeline directly from our FPSO into the country to allow the country to replace its fuel oil power generation with gas. Unfortunately, the Cypriots have been making a number of moves that haven't worked out, including an FSRU that is still not there, and they're still burning fuel oil. So there is a market out there that could benefit greatly from the gas that we have, with a very simple and low-cost pipeline that we can lay straight from the FPSO into Cyprus.
The overall geopolitical situation, obviously, today, doesn't allow us to think about other markets, other big markets, but the Middle East and the southeast part of Europe is a continuously evolving and changing area where, you know, politics change the relationship between countries, and at some point, every war stops. When this war is over, I'm sure there's gonna be more opportunities from neighboring countries to Israel that still need a lot of gas for the reconstruction of their economies, so if you look at the overall supply situation in the East Med at the moment, there isn't any other major development. Leviathan, obviously, is increasing its capacity, Tamar, the same. We are doing Katlan, but there isn't any other major development happening, or at least, anything visible for the near future.
The exploration wells that have been drilled in the East Med, unfortunately, we were part of them, and some were not successful. So Israel, for us, remains the top priority to develop more gas. I mentioned earlier about the other areas that we haven't yet started to look at, Arcadia, and in future calls and future engagement with all of our shareholders, we will be elaborating on that. There is more gas in our licenses before we start to talk about further exploration. So having the FPSO as a central processing hub is the best infrastructure we could have in the region, because from the FPSO, we can reach Israel, we can reach the network that goes to Egypt, we can lay new pipelines to go to countries, and we can reach other neighboring countries when the geopolitical situation allows.
So what we've created so far is the infrastructure that allows us to develop smaller accumulations like we're doing with Katlan. Twenty-six BCM, the two wells that we're developing now, in anybody else's hands, would have been totally uncommercial. In our hands, become very valuable because we have the infrastructure, and infrastructure is the most important element for development of gas. So we own it. I remind everybody, we own 100% of the FPSO, 100% of the pipelines, and all the other infrastructure that we need is there to increase our gas sales to Israel. If there are opportunities, and the price is right, and the credit conditions are right, we can reach Egypt, we can reach Cyprus, and we can reach the wider world if LNG exports happen through Egypt.
At the moment, I don't see it happening simply because of the fact that Egypt needs more gas than we can all produce, all of us, not just Energean, Chevron, and the other players in Egypt.
Very well. Thank you very much for all of the color there. That's really much appreciated. And then perhaps if I can finish on a second, unrelated question then, and that would be around M&A. So you've talked about, you know, opportunistic M&A in the Med. I mean, of course, you know, not so long ago announced as a disposal package of, you know, producing assets in the Med. I'm just looking to understand, is there any particular characteristic of assets that you're now looking for that perhaps the disposed assets didn't meet? Or would you just say this is very much a value game? It's not necessarily certain characteristics you're looking for, it's just about creating value there.
Yeah, let me clarify something about the assets that we sold. It's a great package of assets. It's a great business. Both our Egyptian business and our Italian business are great businesses. But when we started the development of Karish, we had only Prinos, the Greek asset. We needed an asset or a group of assets that would fill the gap between the production in Greece and delivering Karish. And this is exactly what the Edison assets did for us. So they filled the gap until we got to the stable state of production from Israel. So we handed over those great assets at the price, which we think is good. Carlyle obviously thinks that it's good as well from their side. That will allow Carlyle to continue the growth that they want to do in, in their investment thesis. So they're taking over...
It's a great bunch of us. They just didn't fit with our strategy at the moment. We wanted to focus on our flagship asset, and focus is an extremely important word in our thinking, because that is what allows us now to go create more value. What are the characteristics, to answer your question? It's assets that bring value to our shareholders. We like gas, clearly, but oil is also good, but gas is the priority. We like the part of the world we do business, but if you see the map on page 16, the arrows are a bit longer than just the Mediterranean. And if you read carefully the narrative, we are talking about the Mediterranean and the wider EMEA region.
We are widening the reach, not because we don't see that there are opportunities in the Med, but because we feel that we have a stable foundation that allows us to go a bit further out. Don't expect to see us in the Far East. We are very careful to go to countries and projects that we have a niche, in countries where we understand the above surface and the below surface. We need to know the rocks. We need to understand how to navigate in the geopolitical situations of every country. And, you know, look at what we've achieved so far. We've navigated, obviously, through a pandemic. We've navigating now through a very challenging situation where the biggest assets or our flagship asset is in a war zone, but it has not been affected by what is going on.
So we know how to deal with complex situations. We're not afraid to go to any country where value can be created. So gas, the wider Med and EMEA region, value creation, operatorship, very important because we like to control our destiny. We don't want to be just paying the bills that somebody else sends to us, and we want to create value fast. We want to deliver projects. I want to mention, for example, what we've seen recently come out of Cyprus, where a development exactly the same size as the Karish, one floating production unit, four subsea wells tied back to an FPU, has been priced at $4 billion. Well, I remind you, we spent $1.7 billion for exactly the same project. Yes, prices have gone up, but not that much. So we like to do things at a low cost, deliver.
FPSOs have had huge problems. Other companies have had... That started with us, had to go through years and years of problems before they could start up. So we've delivered operationally, we've delivered assets, we've delivered sales, we've delivered financings, we delivered equity, right, equity, appreciation from our share price. So we like to be in control. All of the above give you the framework that we see as the key criteria for an M&A transaction.
Perfect. Thank you very much. Happy to pass it on.
Thank you. And up next, we have Mark Wilson from Jefferies. Please go ahead.
Thank you for that. I'd just like to follow up on the infrastructure answer previously, Mathios. I think Nitzana is a specific export route you have volume exposure to once it's built. Can I ask if there is potential for your commercial team to open up export routes for your Katlan gas from existing other export routes once it is on stream? That's the first question. And then the second is, I heard mention of appraisal of the Arcadia area a few times, mentioned. Is there a chance that once the drilling of the Katlan development would is underway, that rig may stay on to do this further appraisal drilling? Those are my points. Thank you.
Existing routes, yes, there is the opportunity to go through Jordan and into Egypt and sell gas into the Egyptian market, but as we've seen, gas from Katlan will start to flow at the beginning of 2027, so we have a couple of years until we get there, so our immediate priority is to sell as much gas as we can in 2025 and 2026, and of course, in parallel, we will look at the longer term situation, so whether Nitzana will be built in this time frame, I doubt it. I think it's gonna take longer, given the permitting time and the building time, so this is for the future, but there are opportunities, as I mentioned earlier, if we want to export. But export is not necessarily the panacea here, right?
We see, as I said earlier, demand in Israel, so it's the low-hanging fruit that we're gonna go after. It's maximizing sales, maximizing revenue and cash flow from good credit quality buyers. And, you know, gas molecules, we can sell them to Egypt, we can sell them to anybody else. It's also a matter of price. What is the net back price that you get after you deduct all the various charges from pipelines, from INGL, from FAJR, from the Egyptian network? So export is not the answer and the solution to everything. It is making sure you sell gas to the best price at the best credit quality, and sometimes you may decide to sacrifice a bit on price for peace of mind. And that is what we're doing now. Arcadia, our drilling operations will happen obviously for the wells in Katlan.
We will have options as we always build in our contracts with the drilling contractors. And if we consider that it is appropriate to drill a well in Arcadia, yes, we won't be afraid to do it. There is more gas that we need to prove up also in the wider Katlan area. And I showed on the slide, there are more wells to be drilled that have proven gas that we may decide to develop. So we have a wide range of options, whether we decide to do development wells in Katlan, development wells in Tanin, further appraisal in Arcadia, or go for other exploration targets that our team is working on. It is something that we will be working on over the coming months.
For now, and for the remainder of the year in 2025, we want to produce as much as we can from our existing wells. We want to increase the liquid production with a second oil train. We want to maximize cash flow. We want to continue to pay down debt. We want to close the transaction with Carlyle, pay off the corporate bond. We also have a refinancing of a bond coming up in March of 2026 that needs to be done, so we will have a busy six months, and of course, when the rig arrives for the Katlan drilling, we will have ready targets, and we will evaluate based on the situation then what to do.
Thank you for those. I'll hand it over, and an excellent performance from the FPSO so far. Well done.
Thank you.
Thank you. And with that, I'd like to hand the call back over to you, Tilly, for questions via the webcast.
Thank you, Saskia. We've got a question from the webcast, which is: Please, can you talk about the Prinos carbon storage business model? Is this just to reduce and store your own emissions, or can you see this becoming a business-generating revenue from third parties? And if so, how do you envision that working commercially? Thank you.
Thank you for the question, whoever posted the question. It's a project that we are working on. It is not to store our emissions, it is to store third-party emissions. Greece, at the moment, has more than eleven million tons of industrial emissions. The capacity of the Prinos field is anywhere between one and three million tons. We're doing the studies to confirm the actual emission capacity of the CO2 capacity of the field. It's a project that doesn't have many technical challenges, but like every other CCS project, has a lot of commercial challenges. I repeat the fundamental principle that I've said before. It is a project that needs two things or three things to happen. One is CO2 pricing in Europe to be significantly higher than what it is today.
When the carbon emission pricing is at the levels of EUR 60 or even EUR 70 per ton, emitters may choose to emit CO2 instead of paying for storage. The second thing is it needs significant support from the European Union and the Greek government, and we have received approvals, but we haven't received any money yet. The third, and very important element for our shareholders today, is that this is not a project that we intend to burden our balance sheet with. To the extent that this, the development of the project can be done using funds available for decarbonization projects from the European Union to take it to an FID stage, we will continue to progress. If that doesn't happen, we will continue with soft studies, no major CapEx. The question about the business model is very simple.
Emitters will need to decide if they will pay the penalties or pay for storage. If the price that they need to pay is sufficient to justify the investment that is required for a CCS project, we can do it. The project has progressed significantly, but it's still not at a maturity stage to talk specifically about business plan, investment amounts, investment returns. So this is clearly a future investment for us. Maybe it doesn't fit with our business case, because the last thing that we would do is take money from our dividend stream to invest into the unknown of CCS in the future. So great project to develop, very careful with use of shareholder funds, because our shareholders want growth, our shareholders want dividends from stable projects like the ones we've delivered.
Potentially, this could become a different business line, or it could be better off in the hands of someone else that has the appetite to do specific CCS projects. We're working on it. It's early days. It's part of our contribution and our commitment. I remind everybody, in COP, the last COP, we were part of the charter of companies that agreed to work on the decarbonization of hard-to-abate industries. And we feel that it's our responsibility as an operator, as a responsible and sustainable company, to be part of the decarbonization of heavy industries. That is a major contributor for the Greek decarbonization process. We are developing it, but not at the expense of the business that our shareholders put their money behind Energean. We will continue what I said before, stable cash flows from Israel, growth from opportunistic M&A opportunities.
That is what Energean is all about.
Thank you. That concludes the questions, so I'll hand back to you for any closing remarks.
Thank you all very much, and, it's obviously, as I said in the beginning, very exciting to be running a hundred and eighty thousand barrel a day company. I remind everyone, 2018, when we listed at about 4 GBP, we were just producing from Prinos, and this was a dream. This has become a reality, and with the same passion, the same effort, we will continue to deliver value to all of you, and thank you all for attending our call today.