November 2018

 

Can you tell us about your journey that ended up in CEO of Energean Oil & Gas?

 

I first caught the oil and gas “bug” the first time I visited a rig as a school boy. From there, I went on to study for a master’s in petroleum engineering and then spent over 18 years in investment banking working on deals predominantly in the oil and gas sector. In the 90s, I was a Vice President of Shipping, Energy & Project Finance at Chase Manhattan Bank in London and arranged financing in excess of US$5 billion, mainly in the oil & gas sector. With the combination of skills gained from my petroleum engineering background and time in banking, I established Energean in partnership with trusted business partners in 2000.

 

What motivated you to set up Energean Oil & Gas?

 

Greece was flooded with oil and gas explorers in the 1960s, but drilling proved unsuccessful for the most part. The only notable success was the Prinos offshore field discovered in the 1970s by Northern Aegean Petroleum Company. A late 1990s oil price crash rendered production unsustainable, foreign companies started to leave Greece which had a huge economic impact. The Prinos licence was was owned by a company called Kavala Oil which didn’t have the resources to grow the asset. In 2007, I saw this as a perfect opportunity to buy an undervalued, producing asset in shallow waters with existing underutilized infrastructure. The majority of the deals I had worked on as an oil and gas investment banker were in the upstream segment, and the knowledge and experience gathered during those years helped me make the decision to buy Prinos. I teamed up with Stathis Topouzoglou, a shipping entrepreneur, and we became the co-founding shareholders in Energean as we both shared the vision of creating the first independent E&P player in the Med.

 

What, in your view, has been the key to Energean’s success?

 

Energean has grown from £1m, which was the price we paid to acquire Prinos, to a £1bn company in 10 years to be the third largest FTSE 250 E&P company. I think that there are a number of factors that have really been key to enabling this to happen.

Firstly, we have a strong focus on the Med as I believe that independents need to be best in class in a region and operate in an area that they know and work to its strengths so that investors know what they are investing in and know that management have the knowledge and skills to deliver on promises.

Secondly, Energean has always ensured that capital discipline and allocation was at the forefront of decision making.  Taking advantage of opportunities like Prinos or Karish or securing the assets in Western Greece when others were afraid to touch them and converting them to into successful business stories requires understanding of the rocks but also ability to manoeuvre  in complex geopolitical situation.  This, coupled with ability to assemble a committed and dedicated team, raising funds even in the most challenging market conditions and building a track record of delivering on our promises allowed us to successfully execute the only E&P IPO in the LSE in 2018 and the first one after 4 years of inactivity.

Moreover, the growth potential from our portfolio and the prospects of creating the leading independent in the Med allowed us to attract a very high calibre investor base that is supporting Energean for the next decade of growth.

 

What impact has Energean’s recent $460 million in an IPO on the London Stock Exchange had on the Levant Basin in the eastern Mediterranean Sea?

 

Following the London IPO, the $460 million that we raised back in March, the $1.3 billion of project financing that supported us to fund the project in Israel, and the lump sum turnkey contract with Technip, we were able to take the Final Investment Decision on the $1.6 billion Karish and Tanin development immediately after the IPO. This kicked off the very exciting project of developing the Karish Energean reserves offshore Israel.

Marketing-wise we signed Gas Sales and Purchase Agreements for 4.2bcm a year for 16 years with the leading power producers and industrial companies in Israel, securing $12 billion of revenue for Energean over the next 15 years. In a market that is continuing to demand more gas, all our buyers are bidding for more power generation. Israel is gasifying its economy, increasing the use of gas, reducing the use of coal, and that is creating a very favourable environment for Energean to operate in.

When we decided to build our FPSO we decided to increase the capacity to 8bcm – 4.2bcm of which is already contracted. We have spare capacity remaining on the FPSO and the pipeline to fill up the system and generate a lot more cash flow. We believe that this will be extremely important in the developments that are coming up in Israel over the next few years.

The delivery of gas from Karish in Q1 of 2021 will bring competition and security of supply to the Israeli gas market two promises that we made to the Government of Israel when we were entrusted by them to be the second operator of gas fields in the country   In addition, the installation of the only FPSO in the East Med creates strategic infrastructure that will prove to be very valuable in the future for Energean but also the development of other gas fields in the area.

 

How can independents best evolve and raise capital over the next few years to continue to be a driver of play opening discoveries?

 

Firstly, I think that it is very important for management to have “skin in the game” and are aligned with shareholders, but ultimately, independents need to try to deliver against expectations and deliver on the goals that they have set out to achieve. In turn, this has an effect on being able to go out and raise funds. For me, I believe that independents, like Energean, will need to structure projects to protect downside to raise debt capital to provide growth opportunities unique that are unique to the region that they operate in.  Ultimately, the best way of raising debt and equity capital is to have good assets, a trusted management team and a have a track record of meeting the promises made to investors and banks.

About Mathios Rigas: