Energean (LON:ENOG) reported a stronger first half of 2026 despite a 41-day production shutdown at its Karish asset in Israel, with the company citing higher free cash flow, increased profit after tax and lower net debt while it continued investment in the Katlan development.
Chief Executive Officer Mathios Rigas said the company entered the second half from a position of strength after production exceeded 180,000 barrels of oil equivalent per day in August. The company maintained its full-year production guidance of 130,000 to 140,000 barrels of oil equivalent per day.
Profit and Cash Flow Increase
Energean reported six-month EBITDA that was 5% below the prior-year level, while profit after tax rose 45% to $160 million. Benos attributed the profit increase to cost control, favorable foreign-exchange movements from a stronger U.S. dollar and lower taxation.
Operating cash flow exceeded $550 million, aided by a reduction in Egyptian General Petroleum Corporation, or EGPC, receivables to $75 million at the end of the period from $215 million at the start of the year. Free cash flow was more than $350 million, up about 35% year over year, according to the company.
Capital expenditure totaled $350 million in the first half, principally reflecting work on Katlan. Energean kept its 2026 development capital expenditure guidance at $800 million to $850 million and its year-end net debt guidance at about $3.3 billion.
Benos said the company expects leverage to remain in a range of 2.5 times to 3 times during the capital-intensive Katlan construction phase. Its medium-term objective remains reducing leverage to two times following the project’s completion, which is expected at the beginning of 2027.
Israel Production, Contracts and Katlan
Group production reached 182,000 barrels of oil equivalent per day in August. Rigas said the company has expanded oil-production capacity at Karish to 31,000 barrels per day following completion of a second oil train. The system has been tested at 25,000 barrels per day, and the company is gradually bringing on oil-rich wells.
Liquids accounted for 32% of Israeli revenue, Rigas said, while Energean averaged $88.40 per barrel for oil sales in Israel during the second quarter. He also said Karish produces more than three times the oil volumes of Leviathan and Tamar combined.
The company announced a new gas sales and purchase agreement with Sorek that it said represents $1.4 billion of secured revenue. The agreement brings Energean’s total contracted revenue to $22 billion over the next two decades from long-term contracts in Israel and Egypt.
Rigas said the company sees about 10 billion cubic meters of incremental gas-demand growth in Israel over the next two decades, driven by electricity demand, economic growth, technology activity and data-center development. The company also expects to pursue export opportunities through the planned Nitzana pipeline while continuing to sell into the Israeli market.
Katlan remains on budget and on schedule, according to management. Energean has completed two subsea campaigns, installed two modules on its floating production, storage and offloading vessel, and completed the Athena and Zeus development wells. The remaining subsea campaign is planned for the second half of 2026, with first gas from Athena and Zeus targeted for the first half of 2027.
Egypt Investment Program
Energean reached an agreement with EGPC to merge its Abu Qir and NEA/NI concessions, subject to approval by Egypt’s parliament. Rigas said the combined concession would feature improved fiscal terms and higher gas prices, although he did not provide specific commercial terms.
The company plans to commit $150 million to an investment program over five years, targeting a doubling of production from the existing areas. The program includes sidetracks from existing wells and new wells near existing infrastructure.
Rigas said the merger also adds deep exploration rights at Abu Qir, where Energean estimates more than 3 trillion cubic feet of potential, with an earlier presentation citing potential of more than 4 trillion cubic feet. The company plans to acquire seismic data and pursue an exploration well, potentially with partners.
Management said Egypt remains a core operating country, citing improved collections and the government’s focus on increasing domestic gas output as the country imports gas from Israel and liquefied natural gas facilities.
Exploration, M&A and Capital Allocation
In Greece, Energean and partners ExxonMobil and HELLENiQ ENERGY are targeting an early second-quarter 2027 spud for an exploration well in Block 2. Energean is the operator, and Rigas said the prospect contains more than 9 trillion cubic feet of prospective gas resources, while noting the risks associated with frontier deepwater exploration.
The company also expects first gas from Croatia’s Irena development in the first half of 2027 and plans to drill an additional exploration well at Isabella 9. In Italy, it is seeking to optimize production from assets producing roughly 8,000 to 9,000 barrels of oil equivalent per day.
Rigas said Energean is evaluating transformational acquisition opportunities in the Mediterranean and West Africa, with an objective of building three broadly balanced production hubs in Israel, Egypt and West Africa. Benos said any transaction would prioritize non-recourse, asset-based financing where possible and would not be structured to increase the company’s leverage ratio.
On shareholder returns, Rigas said the existing asset base should generate stronger free cash flow from the second quarter of 2027 after Katlan is completed. He said the company could then consider both higher dividends and lower leverage, though he did not provide a specific timetable given ongoing capital spending, geopolitical uncertainty and potential acquisitions.
About Energean (LON:ENOG)
Energean plc engages in the exploration, development, and production of oil and gas. It operates through four segments: Europe, Israel, Egypt, and New Ventures. The company holds interests in the Eastern Mediterranean. Its flagship project is the Karish project located in Israel. It also provides financing services; and holds a gas transportation license. The company was formerly known as Energean Oil & Gas plc and changed its name to Energean plc in May 2020. Energean plc was founded in 2007 and is based in London, the United Kingdom.
