Welcome to the Energean plc January Trading Statement and Operational Update. This session is led by Mathios Rigas, CEO, and Panos Benos, CFO. Currently, all participants are on mute. There will be a Q&A session at the end. I'll now pass over to Mathios Rigas. Please go ahead.
Thank you very much. Good morning, everyone, and thank you for joining our January Trading and Operations Update. Happy New Year to everyone. I hope this is a year with less conflicts around the world that will allow us to continue to grow the fantastic business that we've built.
Let me start with some highlights of today's presentation, starting with our performance for 2024, which has been another year of growth, another year where we delivered record numbers: 153,000 barrels of oil equivalent per day group production, of which the continued operations, the continuing operations, we will define continuing operations, the perimeter outside the assets and the country that we're selling to Carlyle delivered 114,000 barrels of oil equivalent per day, $1.8 billion of revenue, $1.2 billion of EBITDAX, two and a half times leverage, and cumulative dividends so far of $540 million in line with our plans and our promises to deliver up to $1 billion by the end of 2025.
The first and most important point for 2024, the FPSO has performed exceptionally well with an uptime of 99%, and I am hugely grateful to a fantastic team that, despite the geopolitical challenges, despite everything that's been going on with the war between Israel and its neighbors, managed to operate safely and efficiently the FPSO without having any issues during the year. Production is increasing, and all our projects are on track. We'll look at them later in more detail. The Carlyle transaction that we announced last year, selling our business in Egypt, Italy, and Croatia, is expected to close this quarter. We are waiting for approvals by the Italian government. It's just bureaucracy, nothing to worry about. It's expected to generate around $800 million of proceeds, cash that will allow us to strengthen our business, our balance sheet, return money to shareholders, and continue the growth.
The news of today is that we have signed new gas contracts in Israel, which are worth over $4 billion, to grow our business in the country in response to a growing domestic and regional gas demand that we see increasing substantially. Also, removed from 2026, the risk of refinancing of the bonds that were maturing in March, and we'll go into that in more detail later. Last but not least, growth. Post-Carlyle, we look to expand geographically in a wider M&A area with a stronger balance sheet, and we will continue to deliver and look for deep value opportunities like the ones we've delivered so far from buying Greece, Prinos back in 2006, buying Karish in 2016, buying and then selling the Edison assets in 2019.
So we will continue the path that brought Energean from what I started back in 2006, a million-dollar business, to what is today one of the largest independent E&Ps with tremendous track record both on operations but also on balance sheet strength. Let's move to the next slide, please, to look at operations. Quick snapshot. As I said, the FPSO is working exceptionally well. Our project Katlan is on track. The second oil train that we managed to lift in the middle of the war is on track for commissioning the first half that will allow us to increase liquid production.
We are reporting today netback, which we haven't showed you before, showing a business that, despite it being gas-focused and despite it being with long-term gas contracts, has a netback that reached $21.3 per barrel of oil equivalent in 2024, showing that this is a very profitable business and the team is doing a great job in running it very efficiently. The business is supported by a substantial 2P reserve base of close to a billion barrels from Greece, U.K., and Israel. Obviously, I exclude the perimeter that has been sold to Carlyle that has a material reserve life of 21 years. Again, a unique situation where we have a very long life ahead of us to monetize all the value from those assets.
Moving to page seven, I want to focus on production and sales in Israel, which is a key topic, obviously, for us and our investors. In 2024, we saw increased sales. We started Karish North and the second gas riser that brought our production in Israel to 114,000 barrels of oil equivalent. We predict or expect to go even higher, between 120,000-130,000 barrels a day. There is going to be an impact of scheduled shutdowns. These are shutdowns that we need to do to complete the commissioning of the second oil train. So excluding the shutdowns, this production would have been even higher, but that's part of the business that we're building. Longer term, the slide shows the annual contracted quantities just for the next decade.
Obviously, it continues beyond 2035, showing ACQs above seven BCM a year, approaching eight BCM a year, and a floor price that underpins our business, a floor, sorry, a take-or-pay that underpins our business. Obviously, our target is going to be to maximize sales every year in every part of the region, whether it is in Israel or through exports. We would look to get as close to ACQ as we can to the annual contracted quantity and even more. I remind everyone that this is not just a 2025 or 2026 business. This is a 15-year business that has long-term gas contracts to very high credit quality buyers. If we go to the next slide, please. This year, we signed new gas contracts in 2024, and we're announcing today a new gas contract with Dalia.
Total value of new gas contracts signed in 2024 and 2025 exceeds $4 billion, bringing the total value of gas sales contracted over the next 20 years to over $20 billion. This is an amazing number, and I think there are very few companies that have contracted safe, predictable cash flows coming from gas sales to the high-quality buyers that we show on this slide, slide eight. The power producers of Israel, the industrial companies in Israel, they're all extremely strong companies and underpin our business with their contracts that we've signed with them for the next 20 years. I repeat the number: $20 billion of contracted gas for the next 20 years, on top of the oil production, on top of the other businesses that we run, is the foundation of our business and the foundation of our future growth. Moving on to what comes next.
2026, we will drill the wells for the Katlan development. Athena and Zeus are discovered resources, and we will complete the development drilling of those wells. We have options to drill other structures that have a very high probability of discovering a lot more resources than what we have today. Just mentioning today, the Orion, 63 million barrels of oil equivalent, roughly 10 BCM of gas. Again, these are structures that we map with exactly the same amplitude anomalies that we have in the wells we've drilled successfully so far. These wells will be drilled in 2026 in parallel with our Katlan development to bring more gas to the system we already have. I remind everyone in Katlan, we have no seller royalties or export restrictions. Obviously, we are looking at every market, the Israeli market and the export market.
We like selling to the Israeli market because we have reliable buyers that pay us on time as opposed to the payment delays that we had faced in the past with Egypt. So to the extent that we see continuous gas demand in Israel, we will focus on our strategy of long-term gas contracts to supply the local market. In addition to the drilling of 2026, there's organic growth, so please move to the next slide, that comes from two major areas in our portfolio. First, in Israel, in 2024, the Israeli government officially recognized Dragon, the Hermes, and Hercules discoveries as discoveries, and we are working on development plans to tie these opportunities back to the main production systems and have more gas to sell in the future. We have additional licenses that we're working on to drill and de-risk prospects there.
In Greece, block two, in the western part of the country, we have 75% in a very prospective block. Very recently, we saw and welcomed the announcement of the Greek government that Chevron expressed interest in the western part of Greece. Obviously, Exxon is operating in the south of Crete blocks. Chevron expressed an interest to get into Greece. So we do see Greece as a potential area of growth, especially the western part of the country. We have a drill or drop decision to take in 2025, and we will be working with our partner and with the government to move the project forward. With that, I would like to hand over to Panos to take us through the financial results and projections for the year.
Thank you, Manthios. Good morning, all.
2024, in spite of the major geopolitical tensions and hostilities in the region of our operations, was a year that we delivered in all important metrics, continuing the year-on-year growth of both production and profitability of the business, and as you can see on Slide 14, that growth of profitability exceeded 33% in our continuing operations, driving the group EBITDAX at levels well above $1.1 billion, 25% higher than 2023. Going to all the other metrics, revenues reached $1.8 billion, while our cost of production per barrel reduced to single digits. The $10 that you see there is a rounding of the $9.8 per barrel we achieved. Worth noting here that excluding royalties, our controllable cost of production per barrel in the continuing operations is as low as $4 per BOE.
Our Cash SG&A one more year below $40 million, one of the lowest in our sector and our peers, especially for listed companies, in spite of the increased M&A-related costs we incurred due to the Carlyle transaction. On CapEx, across all countries and types of CapEx, we had a pretty busy year with a total spend of $730 million, roughly half of it spent in the continuing operations, in more detail, the main activities that we spend money on are the Cassiopeia gas field that came into production the second half of 2024, the Katlan project that launched beginning of 2024, the two exploration wells in Egypt, one of them a location which was successful, and our appraisal activities in Morocco.
Finally, we continue delivering on our deleveraging target, which is now recorded at 2.5 times, and our absolute net debt well inside our guidance for the year at $2.95 billion. I want to remind you all that beginning of 2023, we started with six times leverage. Moving to slide 15, please. We reiterate our discipline and transparent capital allocation policy. We reconfirm our plan, as announced in September 2022, for a $1 billion return to our shareholders by end of 2025, including a special dividend of $200 million post the closing of the sale of Egyptian, Italian, and Croatian assets.
We will continue investing and growing in our business, pursuing further development exploration opportunities within our portfolio, as Mathios mentioned, and we will be assessing M&A opportunities in our new expanded area of focus in the EMEA region, applying the same investment criteria and principles that have got us where we are today. Finally, we continue optimizing our capital structure, utilizing all available debt products and relationships we have built over the years. As a result, to refinance the 2026 bonds that are maturing in March 2026, we will be utilizing, almost after four years, the bank loan market again with our new partners, Bank Leumi, instead of issuing a 10-year bond that we had done in the past. At current market conditions, we are convinced this offers the lowest cost of debt and the flexibility needed by our business.
As a result of this refinancing, we expect our weighted average life of debt to exceed seven years, which is pretty unique for an upstream company, and our blended cost of debt to stay well below 7%. Moving to slide 16. Thank you. Our guidance for 2025 will be only for the continuing operations, as we expect the Carlisle deal to close by March. So this includes operations in Greece, Israel, and the U.K. Production expected to exceed 120,000 barrels a day, as Mathios explained, taking into account the demand seasonality in Israel, the new contract signed, and of course, the impact of the scheduled shutdowns for the projects that we're currently running in the country. Our net debt is expected to drop towards the $2.7 billion area. I expect this number to be one of the first I will be revising during the year.
We need to see when the deal closes and how quickly we will be taking out the corporate debt that has an impact on the interest paid, of course, but I'm optimistic, cautiously optimistic that that number will go even further down. Cost of production at $410 to $450 to $440, slightly increased from last year, but driven exclusively from the higher royalties we expect to pay to the Israeli government because of the higher production and revenue expected from the country. We don't see any increase in the controllable cost of production area. If anything, because of the increased production, I expect the cost of production per barrel to drop. Our SG&A expected to reduce actually half to the $20 million mark, including any restructuring costs we may need to incur post the Carlyle deal. Development expenditure at around $400 million, driven mainly by the Katlan project.
And finally, our U.K Decom expenditure increasing to around $60 million versus last year, driven by the Wenlock and Tors asset abandonment projects we have already started. Mathios, back to you.
Thank you, Panos. On the back of these substantial results and the impressive performance, post-Carlisle, the key question that we're trying to answer is, what's next? Where is Energean going to go from here? We are stating today that we are expanding the geographical focus. We used to be a med player. Those of you that have met me, I used to say that we do business in countries that I can fly to within three hours from Athens. We're expanding the geography to countries that are plus minus three-hour time zone from Athens to cover pretty much the map that you see on page 18.
We see a lot of opportunities, primarily in areas where majors have assets that are below the thresholds of materiality for them, but in our hands are extremely valuable. We see opportunities in countries that need committed operators that have the deep water capability and proven track record that we have today from our offshore operations in Israel that are working, as you've seen today, with a great track record, but also the proven ability to raise funds. So the combination of an independent that is fast-moving, low-cost, committed to the countries of operation with deep water capabilities and proven financial capabilities is what gives us all the tools that we need in the toolbox to go unlock deep value deals like the ones we've done so far.
We've proven with all three acquisitions that I mentioned earlier that we know how to unlock value where others are afraid to go or are concerned, and this is exactly what we will be continuing to do for our shareholders. Obviously, the $800 million in proceeds that we expect in the near term will give us even more firepower to go out and do the deals that will continue the growth of our business. I remind you that we have a very stable foundation from our Israel business that underpins our growth. We will be very happy to continue to produce the gas and the oil from our Israeli asset, to continue to develop the Greek CCS business as it evolves into the transition of the future, and be very disciplined, as Panos said, in delivering only deep value deals that make sense and are appreciated to our shareholders.
So, to close our part of the presentation, what we expect to happen in the short and medium term in 2025: Carlisle transaction expected to close and bring in the cash that I mentioned earlier. We will be commissioning our second oil train so that we can increase liquid capacity and production of oil in Israel. We will, of course, continue all the projects, Katlan, and the drilling plans that we have for 2026 to materialize further outside from Israel and the other parts of the business. We will continue to sign long-term gas contracts in Israel to increase further the contracted gas volumes so that we can sell even more gas in the shoulder months and get to the maximum capacity of the FPSO. We plan to sign the 10-year loan that Panos described, removing the near-term maturity risk that we had in March of 2025.
Our plan to continue paying dividends to our shareholders is rock solid. We have said before that the dividend policy will be redefined post-transaction close. I don't want anybody to think that this means that we are intending to reduce dividends, but we are obliged to wait for the transaction to close, redefine our business, and then we'll come back with our discipline and commitment to shareholders to pay back as much money as we can. We believe shareholders are better custodians of cash than we are, and that's why we return money back to all of you so that we can redeploy whenever we find a transaction that adds more value to our business.
We will focus on deep value M&A in our expanded geographical remit and continue the journey that started from Prinos, continued with Karish, with Israel, with Egypt, with Croatia, with the U.K, into countries that we see opportunities today that meet the criteria that I mentioned earlier. With that, I thank you for your attention, and I'd like to open the floor for any questions.
We will shortly begin the question and answer session. If you would like to ask a question, please press * 1 on your telephone keypad. That's * 1 to ask a question. Participants can also submit questions through the webcast page using the Ask a Question button. We'll pause for a moment to assemble the queue. And your first question comes to the line of David Round from Stifel. Your line is open.
Thanks. Morning, guys. Thanks for the presentation. A couple for me, please.
The first one, I was interested in the new gas contract. You had a contract with Dalia before. Is this a similar contract? And can we read anything into the fact that they went elsewhere or maybe tried to go elsewhere and then decided to come back to you?
Yes, you're right. There was a contract with Dalia. We did have at some point a dispute. We settled it. The relationship with Dalia is rock solid. They are continuing to expand their business. They show us their trust. And as you said, they came back to continue with us the journey, and we're very pleased for that. So we're very happy for the business and continuing with the new gas contract. The terms of the contract are roughly the same with what we've discussed before, with take or pay provisions, with long-term pricing.
Obviously, I can't, for confidentiality reasons, give all the details of the contract, but the numbers that you've seen are roughly 18 years, up to 12 BCM over the life of the contract, and the total revenue expected from this contract of about $2 billion.
Okay, great. And maybe sticking on Israel then, just thinking about the contracting, I mean, you've got these restrictions to service the domestic market from Karish, and I know you've talked about Katlan being potentially different, but just sticking with Karish for now, at the moment, you have this excess supply. Some of that, as you've talked about in the past, is down to the security situation. May change pretty quickly. But for now, has there been any discussions around sort of loosening those restrictions for the excess supply you've got today? Or is this going to be a bit of a moot point?
Do you alternatively expect the demand picture to change pretty rapidly post the developments we've seen in Gaza recently?
Well, David, the development of the market in Israel is continuing regardless of the war. Domestic demand reached 13 BCM in 2023. It's expected to continue to rise because of improved economics, because of coal reduction, and it's going to exceed 20 BCM by the end of the decade. So whether restrictions will be looser or not, to be honest with you, we want to sell gas. We don't care if the gas goes to Israel, to Egypt, to Jordan, or to the rest of the world, as long as the buyers of this gas are reliable, they pay on time, and we don't have to deal with credit risks that are unnecessary risks for our business.
So as long as Israel continues to burn gas for power generation or industry, we are very happy to continue contracting. And as you see on page eight of the presentation, we have a very diversified universe of buyers who give us a nice diversified customer base rather than having a single country or buyer risk if we were to export to Egypt, for example. So we are looking, obviously, at the export markets. At the moment, my view is that there's so much gas demand between Israel, Jordan, Egypt, the reconstruction of Palestine and Lebanon and the wider area that there's not going to be that much gas available to be exported to Europe. So we have enough demand close to home so that we don't have to worry about the wider markets and wider exports to the rest of the region.
So as long as Israel continues to grow its gas demand, we're very happy to continue selling to these very good customers of ours down there.
Okay. Very clear.
Thank you. As a reminder, if you wish to ask a question, please press * followed by 1 on your telephone and wait for your name to be announced. And your next question comes from the line of Sasikanth Chilukuru from Morgan Stanley. Your line is open.
Hi. Thanks for taking my questions. I had two, please. The first was going back to the production guidance and the gas sales in Israel. 2024 production and gas sales were impacted by the coal phase-out delays and warmer-than-average winter temperatures. I was wondering what the current 2025 guidance incorporated, whether it was a similar effect, these issues going into 2025, or conditions improving from here.
Just wanted to check what was in that guidance. The second question was on your guidance for net debt. It is coming down, but I wanted to check whether if you could confirm whether it incorporates the cash proceeds that you get from the closeout and whether any M&A is kind of implicitly included in that guidance. If you could confirm what that guidance also had.
Thanks for the question. I'll take the production guidance, and Panos will take the net debt question. In our guidance for 2025, we reflect the reality of what we learned in 2024, the behavior of the customers, and the expected gas demand in the peak months, which is maximum capacity of what we can produce, and lower demand in the shoulder months, which we're trying to fill by selling or contracting more gas to our customers, as we've seen on the presentation.
So one comment that I want to make, because I keep hearing about 2025 guidance and 2026 guidance and production and so on and so forth. I repeat, this is a 20-year business that has $20 billion of contracted gas revenues. So yes, 2025 is important. Yes, 2026 is important, but this is a very, very long-term secure cash-flowing asset for us. So can I predict exactly what the weather will look like in 2025? No, I cannot. Can I predict if there's going to be other disruptions in the market like we've seen over the past years?
And if I was sitting in front of you in 2018 and told you that we would be dealing with a pandemic, with wars, with rockets, and all sorts of problems in the area, but we would be able to navigate through all this, probably nobody would look to invest in this business. But we are navigating. We're managing very successfully every challenge that is in our hands. And right now, what we're trying to do is bring the gas sales as close to the ACQ, which I showed in the slide, which is above the 700 or the 7 BCM a year for every year for the next 20 years. That's the goal of the commercial team. And whether that comes from new long-term gas contracts or spot sale agreements or export agreements, this management team is here to do it and continue increasing production, sales, revenue, and EBITDA.
Last point, which is a very important one. When we focus on production, obviously, this is a number that everybody understands, but it is very easy to increase production by slashing prices and giving the gas at a much, much lower price. We would never do something that just satisfies a KPI that the market is used to see. We will do good business for our shareholders, and we will sell the gas that we have at the best yield that we can for our shareholders, and obviously, respecting competition rules, but we will not underprice just to sell more gas.
I think we have to start to move away from the actual number of barrels of oil equivalent that will be produced and start to look into cash flows and numbers that come out of this business, the netback that we showed you today, the revenue and EBITDAX that we produce, and the strength of the business for the next decades to come. Sorry for the long answer, but I think it's an important point because everybody's focusing on 2025 when this is a business that is contracted for the next 15, 20 years. Panos, do you want to take the net debt question?
Yes, thank you. So regarding the net debt, the assumptions currently for this range are the proceeds from the sale of our assets takes place in March.
There is a range of when actually we will be repaying, prepaying the corporate bond and how fast or when we will be prepaying the 2026s through the bank loan that we have. Now, regarding a debt optimization, if things go as planned, there is room for improvement anywhere between $50-$50 million, roughly, on savings, on coupon and interest savings. On top of that, we have the optionality to monetize if we feel we have to. Again, not just for optics, but only if it makes sense. The VLN that is part of the transaction with Carlyle, we may be able to monetize it earlier. So there is another $100 million of movement there. So I think that's why I said that I'm cautiously optimistic that this range will move lower.
We just need to finalize the transaction with Carlyle, make sure all the timetables and everything has been properly assessed, and I'm confident around April or May that we're giving you an update and reiterate our guidances. We will be much more clear around the net debt, so just to clarify, to be a little bit more specific, I see $100-$150 million possibility and probability of movement in the guidance towards the lower side, of course.
Very clear. That's pretty much for the answers.
There are no further questions at this time, so I would like to hand back to Energean team for closing remarks.
Well, thank you all for attending today. Thank you for your questions.
As I said, and I repeat, we continue to deliver on our core business in Israel, continue our efforts to close as fast as possible the Carlyle transaction, and then look for the next chapter of our journey to continue the growth into the wider geographic area that I mentioned. Thank you all for participating today.