Energean PLC
LSE:ENOG
Earnings Call Analysis
Q2-2023 Analysis
Energean PLC
Energean has made a notable leap in its production, reaching 106,000 barrels of oil per day in the first half of 2023, nearly tripling its output from the same period in 2022. The company is well on its path of rapid expansion, with an updated guidance anticipating a rise to approximately 125,000 barrels per day by year-end. Energean is diligently working to further increase its capacity to 8 billion cubic meters (bcm) annually, intending to tap into the maximum capacity of its Floating Production, Storage, and Offloading (FPSO) unit and reach a milestone of 200,000 barrels of oil equivalent per day in the near term. The financial reflection of this growth is clear: revenues surged by 73% year-on-year to $588 million, and EBITDAX (Earnings Before Interest, Tax, Depreciation, Amortization, and Exploration expenses) also saw a 74% increase, demonstrating substantial operational success and financial stability.
Energean continues to push forward with multiple strategic projects. In Egypt, setbacks in one well have been offset by the successful drilling and testing of two others, keeping the NEA/NI project on track. In Italy, the major gas development project Cassiopea, in partnership with ENI, is slated to come online by 2024. Furthermore, the Olympus development in Israel, now named Katlan, involves a subsea tieback to the FPSO, leveraging existing infrastructure to optimize capital expenditure in a high-cost environment. This meticulous network of growth projects positions Energean to continue its upward trajectory in production and efficiency.
Energean's financial stewardship reveals a company that maintains tight control over its costs and capital expenditures while aggressively deleveraging. Cost containment measures, even amid significant inflationary pressures, alongside a softening CapEx intensity signal a prudent financial management, aligning with the firm's pattern of robust growth. The refinancing of the bonds maturing in 2024 showcases Energean's ability to navigate challenging capital markets effectively, securing a 10-year note that sustains a healthy debt profile with a weighted average maturity of over 6 years at a fixed cost of 6%. The net debt levels are projected to remain within the forecasted range, with strong indications of continued deleveraging towards the long-term target of 1.5x net debt to EBITDAX.
Energean's operational reliability has shined in recent months, achieving 97% uptime and indicating a well-managed resolution of initial teething issues. This performance not only reflects the company's technical prowess but also amplifies its optimism about reaching and possibly exceeding its full FPSO capacity. The company's exposure to the vibrant spot gas market, with nominations exceeding the current supply capability, signals a burgeoning demand that outpaces the 6.5 bcm currently available from Energean. With lofty ambitions, the company projects that upon completion of their growth projects and requisite infrastructure, they will be able to capitalize on regional demand that may reach close to 100 bcm in the medium to long term. This is buttressed by the European market's appetite for non-Russian gas, positioning Energean as a potentially significant supplier in this changing landscape.
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Good morning, everyone, and thank you for joining our call today. We are very happy to be reporting results from the first half of 2023 that brings Energean to be a major producer of gas and oil in the East Mediterranean.
The first half that brought us to 106,000 barrels of oil a day, nearly 3x our production of the first half of 2022. And I'll remind everyone that a few years ago, we were just the producing company from Prinos, grew to back to the Italian and other asset revenue portfolio. And today, we are firmly on track and are steadily producing more than 6 billion cubic meters a year, primarily in Israel, of course, from our FPSO and a field that is performing exceptionally well.
We did have some start-up issues, and I think that is only to be expected like every major project like this, like every major FPSO, but these have been substantially overcome. We did -- we give new guidance with our production results today, and we believe we will be around 125,000 barrel a day equivalent mark towards the end of the year. We did address all the issues of the start-up and the FPSO. I can get into details that people want, and we can arrange deep-dive sessions. But I want everybody to be reassured that Energean today is meeting all its nominations. It is producing, as I said, exceptionally well from the wells and the FPSO is working as it should.
Now, we're not stopping. Obviously, we are continuing. We are continuing with our efforts to increase our capacity to 8 bcm a year, which is the project that will come onstream by the end of 2023 to reach the maximum capacity of our FPSO and our project and reached 32,000 barrels of liquids capacity that our FPSO can do to get closer to our target, which is firm at 200,000 barrels of oil equivalent a day in the very near term.
Moving into Egypt. Last time we spoke, we had results of our NEA#6 well, which were not as expected. And at the time, those of you have participated in the call, I said that there should not be any read across to the other wells of the NEA/NI project. Since then, we drilled 2 wells, tested both of them, and they are in line with our expectations, testing at about 25 million scfd a day. We are spudding our last well tomorrow actually to complete the project by the end of this year, so Egypt's back on track.
Cassiopea, the other major project that we're working on, the biggest gas development in Italy. Again, reiterating and reconfirming that the plan is to bring the field onstream by 2024 with our partner, ENI. The big next step in Israel, the Olympus development or Katlan, as it has been named by the government of Israel. We have selected the development plan. As we have announced, we are going with a subsea tieback to the FPSO, utilizing the infrastructure and building on the strategy of having a central processing and production hub or FPSO and tying back satellite fields. So our selection of the FPSO has been absolutely correct, and that allows us to bring at a low cost in this very high cost environment, the capital and development over the next years.
Our FTP has been submitted to the Minister of Energy and the fleet has been awarded to Technip, who is working to complete the work so that we can take FID by the end of the year. All that, of course, converts into a very strong financial performance, with revenues reaching $588 million, 73% increase year-on-year. EBITDAX, 74% increase year-on-year and a liquidity of close to $900 million, giving us a very solid balance sheet to continue our growth efforts.
Today, we announced another quarter of dividends in line with our policy, which is to continue to return to our shareholders, to continue to have a strong balance sheet and to continue the growth of Energean.
With that as an introduction, I would like to hand over to Panos to walk us through the financial results.
Thank you, Matthaios. Good morning to everyone. As mentioned, as expected, the first half of 2023 has been a pivotal period for Energean when after 5 years of development CapEx, including 2 years of pandemic, I remind everyone, the company is now a much more balanced E&P company, with production rates well above 105,000 barrels a day and growing, three key developments expected to be completed in the next 9 to 12 months, and of course, our continued focus on both organic and inorganic growth opportunities in the region.
As a result, all metrics compared to the same period of last year have improved. Production is the most impressive one, which is threefold, the one recorded last year. Costs, despite the huge inflationary pressures in our sector, have remained well under control. If anything, you will see in the guidance, we are reducing the numbers we expect to spend this year. The EBITDAX is $350 million, 75% more than the same period last year. And of course, we're not surprised to see that the CapEx intensity is softening since most of the development CapEx is now behind us. The debt metrics are within and they will stay within guidance and expectations. And of course, as Israel is now into production, the deleveraging is going to be fast and as expected in the next 12 to 18 months.
Moving to Slide 6. Again, a slide that I don't think will surprise anyone. We continue our focus to optimum capital allocation. We use our net operating cash flow to pay and send all our maintenance CapEx, which includes asset integrity and OpEx obligations. Of course, our interest in coupon costs. And then to meet our target dividend policy, which we have met, and we continue communicating to all. We have already delivered with a dividend payment of September, almost $266 million to shareholders in line with what we communicated almost a year back.
And of course, our focus on growth opportunities that the technical team continues bringing near-field developments like the Katlan development that Matthaios will go through in the following slides. Of course, we are on track to keep the leverage down to the levels we have communicated as our long-term sustainable level at 1.5x. And we expect this to happen as we meet, of course, our near-term production targets, which are 200,000 barrels a day towards the second half of next year.
Moving to Page 7. Another key milestone that was met this year already was the refinancing of the bonds maturing the first tranche or the bonds maturing in Israel in 2024. Despite extremely challenging debt capital markets, we managed to bring a 10-year note maturing in 2023. Of course, the pricing was above 8%, which is not something we like, but compared to where the market is and compared where the base rates are, we're extremely happy and that represents a tightening of the credit spreads of our story in Israel. And of course, the continuous trust and confidence of the debt capital markets to our story and our project in Israel.
As a result, our debt profile has a weighted average maturity of over 6 years at a fixed now cost of 6%. That allows us plenty of time to complete with our already-sanctioned and underway developments, which include, of course, the tieback of Karish North, Cassiopea and the completeness of the drilling in Egypt as well as reassure and reconfirm our dividend policy has communicated in 2022.
The last chart that you see here, the deleveraging now is evident starting from 2021 that it was the peak, dropping to 6x end of 2022. Midyear, we're just below 4x, and we expect this trend to continue. Each 6 months, you will see this trend continuing, and we're very confident we will be reaching the previously communicated levels of 1.5% (sic) [ 1.5x ] .
Last slide for me, Page 8 in the presentation. We're narrowing the production guidance, as Matthaios mentioned, to 120 to 130. Most of the other metrics, except from the OpEx, is unchanged. Again, in Israel, we see that the team and the asset managers have done a fantastic job to keep costs under control despite the start-up period. All the other CapEx commitments and target for these years, we're not prepared to change at the moment.
If I were to provide some kind of guidance here, I would expect all the CapEx numbers to end up towards the lower end of the guidance. With exploration, decommissioning expenditure, the most likely scenario being that we will be undershooting those figures. So costs well under control, expenditure well under control. Net debt, we will stay between the $2.7 million, $2.9 million, and this is a range that we expect to stay until first half of next year. And then the absolute net debt as well will be dropping. As I said before, the deleveraging with the profitability of our assets now will be very natural and very reliable in the next few months and quarters.
Matthaios, back to you.
Thank you, Panos. Let me take you to Page 10. I think this slide shows the complete picture of what is happening in Israel as we are growing our production, as we are becoming more reliable, and I just want to give everybody a statistic. July and August, our uptime was 97% at the FPSO, so as I said in the beginning of my introduction, the FPSO is working exceptionally well at the moment. And the market is growing confidence in us. We have reached now the levels of 6 bcm a year, with nominations being around that level. So we're meeting all the nominations from our buyers and looking to continue to grow this to get to the 8 bcm level that our target's going to be for the years to come.
On the next page, I would like to bring Nick, our Commercial Director, into the picture to talk about how the market has behaved, what have we sold and what we're planning to do over the next years.
Thank you, Matthaios. Good morning, everyone. Yes, as Matthaios said on the previous slide, we have had a steady ramp-up since the end of our commissioning or through commissioning from first gas. We have to aid this process signed for spot contracts to add to the one we signed with IEC last year to ensure that we had access to solution of the market to get the flow rates through to commission the FPSO. We have continued with those contracts. We received nominations periodically under those spot contracts as well as our firm contracts.
And demand is very strong at the moment in Israel particularly in the summer months, with the hot weather creating a large air conditioning load, which obviously is generated by power, and also our industrial customers who are just over 1/4 of our loads are also consuming at very high levels.
So the picture on the demand side is very good. And we expect to sign in the next few weeks, another 2 fairly small but long-term contracts with new customers, which I think is a sign of the market's confidence in us. And their liking for our product, which is flexible and, should we say, keenly-priced gas.
On the oil side, we've -- as Matthaios said, we have become -- we've brought Israel into the oil exporters club. We lifted earlier this year the first cargo of the oil to be exported from Israel. We've now lifted and sold 4 cargoes, with the fifth due this weekend. We have an arrangement with Vitol to assist us in marketing and exposing our oil to the markets -- the international markets, and we can see that our price differential to other market grades has narrowed with every cargo. And we're looking to optimize, obviously, both destination and freight costs to receive the best netback for that.
In the longer term, we've talked about the Katlan development. On the bottom of that page, you can see -- looking only at the 2P, the existing 2P certified reserves, not the P50, which is about another 35 bcm. That gas will extend, in the base case, our plateau for some years and aid with that cash flow and continued dividend payments. We will also be looking, of course, to push up towards the 8 bcm as well, so some of that gas may well come forward with success in that area.
Those of you keeping an eye on things in Israel, and especially those who can read Hebrew, will perhaps have noted the decision by the Natural Gas Authority in Israel to allocate capacity in the new export line being built between Nitsana and Egypt. And that confirms that Energean will have access to up to 2 bcm of capacity in that pipeline, so our ability to export that gas over the medium term is crystallizing. Thank you very much.
Thank you, Nick. Let me now take you back to the future. Future, meaning that growth projects because we're not just about what we're producing and what we've contracted. It's about how we continue the growth and this journey.
All 4 projects in Israel, Karish North, the second gas export riser and the second oil train, are on track to be delivered and to start production by the end of this year to bring us to the maximum capacity, as I mentioned earlier. The fourth project, as I also mentioned earlier, Katlan, that is in the phase of studies. We're completing the FEED with Technip, and we will do a subsea tieback to our FPSO to increase our reliability, to have more wells onstream and to be able also, I remind everyone, to sell gas from a block that does not have royalties, so 7.5% of the revenue line.
Better numbers for us. And has exports capacity, not -- I wouldn't call it a permit, but ability to export to allow us, as Nick said, to use export pipelines that will be built by others to export gas to either Jordan or Egypt. And of course, we are continuing our discussions to bring gas to Cyprus and beyond, assuming that infrastructure is put in place.
On Egypt, as I said earlier, on Page 13, NEA#6 was brought online in March. No read across to the other 2 wells. NEA#5 have reached first production in July, 25 million scfd, steady production, increasing the production coming from our Abu Qir facilities. Python#1 was completed, tested, and we're now waiting to bring it onstream by the end of this year according to the plan. North Idku#1 is spudding actually tomorrow, and those 2 wells will be simultaneously brought onstream by the end of this year. So Egypt, as expected, coming back to its original expectations.
In Italy, on Page 14, very briefly, we have continued the development of the project with ENI, who's leading. It's a project that is expected to come onstream in 2024 and significantly increase our production of gas into Europe, into Italy and take advantage of significantly higher European gas prices compared to the ones we see, obviously, in Israel.
Now all that summarized on Page 15, our target to become a 200,000 barrel a day producer is much closer than it was last time we spoke. We are targeting very firmly $2.5 billion of revenues, $9 to $10 per barrel of oil equivalent production, EBITDAX of $1.75 billion. And as Panos mentioned earlier, we have our eyes firmly set on reducing our leverage ratios to a net debt-to-EBITDAX target of 1.5x. That is a picture of what Energean will look like from 2024 when all our developments and all our projects come onstream.
Page 16, I think this is a very important page to us because we are producing or we will be producing close to 200,000 barrels a day. And with the 1.4 billion barrels of resources that we have in the group, this gives us a 19-year reserve-to-production ratio, which is a very healthy number. Looking at the future, there's a lot more to be produced from our assets.
Of course, on Page 17, the well that could be a game changer for us is going to be spud later in the year, the Orion-1X well in Egypt on the North East Hap'y offshore block, together with ENI as the operator. We are finalizing, and it's a matter of days, if not a couple of weeks, to complete the farm down that would bring us from 30% to 19% in this frontier. Very exciting well. We don't like to be talking about the huge numbers of -- and risk numbers. They are there for people to assess. It is -- well, it has risk, but it could be a game changer for us.
The rest of the portfolio on the exploration side, we are continuing the work to derisk our Arcadia and Hercules area in Israel, where we did discover gas and continuing the work to assess where our next drilling operation should be. In Croatia, the Izabela-9 exploration well is expected towards the end of the year. We have 2 drill or drop decisions in our very exciting Greek exploration wells. As Panos said, exploration spend is probably going to be reducing. We have our clear target to be a stable cash flow producer, and as I've said many times to you when we speak and meet, exploration and especially frontier exploration for us is money we can't afford to lose. But it could provide very exciting prospects for us.
I'll remind also everyone that all the wells we drilled in Israel last year was successful. All of them found gas, all of them came in as expected. Last but not least, and maybe it's not the first topic of discussion, our ESG plan and our plan to get to net zero. We have continued to decrease our emission intensity, a further 30% achieved in the first half compared to last year. We are now at about $11 -- 11 kilos of CO2 per barrel of oil equivalent, and have our target to reach levels of 7 to 8 in the years to come, and our part to be the leader on the ESG and the environmental footprint front as well.
So let me close and bring the presentation to an end. What's our outlook? What are we waiting for over the next 18 months? Number one, we will increase the capacity of the FPSO to 8 bcm and 32,000 barrels a day and continue to optimize production, continue to target increased reliability of our FPSO, continue to tap every market, every molecule of gas that we can sell in Israel, in the region. We will be going after to keep the selling as much as we can. We will keep that boat full. We are planning to take FID on the Olympus.
We will be calling it from now on Katlan, as per the Israeli naming, at the end of the year to continue the growth of the company. We will bring onstream NEA/NI, the 2 wells, and stabilize our production in Egypt. We will drill our Orion-1X exploration well. We will continue our dividend in line with our policy, and plan to achieve all the short-term targets that we communicated.
Energean will be a 200,000 barrel a day producer very shortly, focusing on gas, focusing on the Mediterranean, focusing on our plan to combine responsibly produced energy, reduced leverage, which is one of our key targets, and continuous growth. And I remind everyone that this company has grown from 2018 when we started and listed on the stock market being an oil producer of Prinos into one of the leading producers in the Med and Europe today. And of course, as I said, responsibly produced energy and progressing our commitment to be a net-zero producer without greenwashing is also one of our key targets.
With that, I thank you for your attention today, and I would like to open the floor to any questions.
[Operator Instructions]
We will now take the first question. One moment, please. From the line of David Round from Stifel.
I've got a couple, please. Can I start just with your uptime of 97%? I mean, that's quite a bit better than what we were expecting. Does that give you confidence going forward that you'll be near the 8 bcm capacity rather than the contractual amounts? And am I reading too much into this? Or does it say anything about your ability as well to push the vessel higher than the 8 bcm because I mean, it seems to be performing pretty well at the moment?
Secondly, can I just -- very quick one, just to ask about your near-term targets. Could you just remind me of the price assumptions behind that because presumably, it's not $90 a barrel?
Thank you, David. Yes, the uptime has been exceptional over the last couple of months. July and August, we were at 97%. Am I surprised? No, I'm not. Am I surprised that we had teething issues and we had startup problems in the first few months? No, I'm not. We did face some problems with chokes down in the wells. I don't want to get too technical here, but we found a solution, we found the root cause analysis, we found the spare parts we needed, and with our own equipment and boats, we're able to address those issues and respond very quickly to those technical issues.
Will there be other problems? Maybe, yes. I can't guarantee what's going to happen in the future, but we are -- another we're learning, and becoming more confident in the operation of this FPSO. We are also optimizing. So where we see that we have a single point failure, we're fixing it to be -- to have a backup plan and be able to respond very quickly to any issue.
Am I confident that we will get to 8 bcm? Yes is the answer. I am, and that's why we are signing 2 more gas contracts, as Nick said, to bring more gas volumes and push as hard as we can. The FPSO -- will we be able to push the FPSO harder? That is something that is too early to tell. Let's be realistic, and realistic means we will work to maximize reliability to bring the FPSO to its design capacity; and b, at the maximum possible uptime that we need to be to meet our nominations and more.
But let's not start talking about increases of capacity. If we want to increase the capacity of the FPSO, the way to do it would be to add another gas train, which we can do. But that will be very much driven by the demand we see in the country and the region, and that will drive us in our next investments in increasing capacity of the FPSO.
Panos, you want to talk about...
Yes, on our targets. And that's not only the targets we communicate, but this is how we run long-term and medium-term economics and any opportunity we will have are prices that we do not contract because, obviously, [indiscernible] the gas is contracted with specific formulas with low price protection and the same in Egypt. So for the rest of the portfolio, oil-wise, we're running anywhere between $65 to $70 price decks, and that is not inflated, so that is real numbers for the long term.
And for gas -- European gas, we are $25 to $30. And obviously, we were putting sensitivities of $5 and $10 to the downside to stress our economics. So any numbers you see from us in any guidance is based on those metrics.
And the next question is from the line of Matt Smith from Bank of America.
Hopefully, you can hear me. I had a couple. I just wanted to focus on the timing of the production issues in Israel, if I may. Are you able to outline what specific issues you've had operationally since the May update? And I guess, specifically, I note that you say that they're substantially resolved now. Can I just focus on what is still left to resolve there, if anything, please?
And then the second question would be on the demand side of things, again, on the Israeli gas side. Thanks for including details on Slide 10. Very useful, I think. But I was just wondering, from your experience so far, if you'd be able to offer any color on how you expect nominations to compare to ACQ volumes over a full year basis, particularly given seasonality will offer some pluses and minuses throughout the year? And perhaps any additional color on how you might expect spot sales to make up for any shortfall? So I guess, ultimately, my second question, really, is how has demand and nomination sort of shaped up versus your expectations so far? And do you have -- are there any reasons why that might alter going forward, please?
Well, let me take the first question, and Nick will address the commercial one. I didn't really want to get too technical, but since you asked and I'm an engineer, I will become a little bit more technical than I plan to.
So the issue that we faced since we last spoke was some problem with the chokes. Chokes are the devices that we use to control the flow from the wells. Those chokes, as we were producing really hard from those wells in the beginning, were failing. Their seals were failing, and we had to replace them. The replacement of each of those chokes in terms of numbers, just to put things in perspective and what it cost, is $250,000 is the cost of the choke insert, plus the cost of the vessel to bring it to the field and change over that choke.
So we faced problems with those downhole chokes. We brought from Technip the necessary replacements and inserts. We brought in vessels and we fixed them. Since then, with the root cause analysis, we found out why these chokes were failing, and this was due to vibration. We fixed the problem, and beyond that, we have now spares on site and we have our own vessels, so we don't need to mobilize another vessel. So from now on, if there is a choke failure, and I just note that since we fixed them, there's been now 6 months of steady, no problem production, we will be able to change them within 24 hours and at a very, very low cost and it will impact to our business.
So those -- that was the main issue that we are pushing some production to the future. There's no lost production. This production deferred to the last quarter and the first quarter of next year. Are there any other issues? Nothing that we know of as we speak. As I said earlier, will something happen? I cannot predict the unknowns. I cannot tell you anything that I don't know today. I'm just reporting actual numbers from July and August. September is performing as per the plan. There's nothing to worry about at the moment, as I mentioned, so we are confident about the production guidance for the year, and of course, for next year.
Nick, do you want to pick the -- or you want to cover the commercial question?
Yes, I'll do that. So as I said, I think, in my introduction that we -- going through the period from first gas and through commissioning, we signed up spot contracts to help us to pull through sufficient demand to complete commissioning. And that is because, as you will recall, a number of our contracts had to make, should we say, transitional arrangements from the previous supplier. And while they were doing that, they kept the flexibility, therefore, to take from the other supplier or from us, depending on circumstances at the time.
And because we had a bumpy ride through commissioning, what tended to happen was that a lot of the buyers took a very conservative approach, particularly those operating in the industrial plant which can't quickly shut down. And those are power generators who didn't have distillate storage or sufficient distillate storage. Since we've become more reliable of late and we've hit the peaks, what we're seeing is very, very strong demand, demand higher than we can supply with our current 6.5 bcm capacity until we have the growth projects finished.
So we have spot customers nominating, but we're unable to supply them, this is why you see nominations are significantly higher than supplies. So I would say that certainly next year, the high period went from June to September when the weather is warm. I will be reasonably confident that we will be producing at whatever capacity we have available at the time. As I said, our industrial customers are taking from us very strongly, and they're not weather-dependent.
So I think I've consistently said I expect to see us close to ACQ than take or pay. And I think I'm still in that bullish, if not even more bullish, for next year and more so from the years onwards, as we say, when we get access to export infrastructure. I think that's going to be the key in the rest of the 15 to 20-year cycle that we will be at capacity -- producing at capacity because we will have access to all markets.
We will now take the next question from the line of Rachel Fletcher from Morgan Stanley.
I just have one, please. Just building on the question on spot demand and some of these spot contracts, I think you mentioned that you had 4 additional spot contracts. I was wondering if you could give any indication of where spot prices for gas have been in Israel recently?
I think I can probably say in the mid- to high falls, depending on the time of the year and the ability to supply of other suppliers. Obviously, exports, as people have seen [indiscernible] statements, exports at times have maxed out and occasionally, we see a price response from that. But generally, we are the most active player in the spot market apart from, obviously, our own customers, and we try and manage appropriately. So at the moment, we say it's in the mid- to high 4s. But again, I would see, in the longer term, that becoming more of a regional price point. And then you look at the prices in Egypt and the prices in Jordan, and you have to factor that in.
We will now take the next question from the line of Ruben Dewa from Jefferies.
I only have two, please. Just one on the dividend policy. Do you still intend to pay back at least $1 billion by the end of 2025? And if so, when are you planning to step up the dividend to the $100 million per quarter that you previously announced?
And second question, I wanted to just get an idea of how you see the competitive environment in Israel, given that you've got Katlan development, et cetera? And in Karish North, how do you see competition for gas sales developing in Israel, given that also some of the competing fields in Israel are undergoing large expansions?
All right, Matthaios. Let me take the first point on dividend. As I said, and as I think, communicated in our RNS, our dividend policy and commitments stay intact, so the targets are as communicated previously. We have no reason to be changing and amending those. And I think the track record so far demonstrates our commitment to this.
Now when we should expect or people should expect an increase, and ultimately, that increase would need to come at some point until end of 2025. We have set that period to the time we will meet our near-term targets, which are the 200,000 barrels a day. That implies that the Cassiopea project, and of course, Karish North and the second oil train we have successfully commissioned, again, if I were to put a period of time that is expected to happen, in the second half of 2024.
So during that time, and assuming we do meet those near-term targets, and of course, the leverage is under control, which should be at those levels of production, we will be stepping up our dividend to get to the target of $1 billion by end of 2025. So dividend policy unchanged as well as the targets as communicated previously.
Okay. I'll say a few words about the demand side, gas demand in Israel. As most of you will know, that consistently independent reporters, we quite often turn to BDO who produce a quite comprehensive report for a number of parties, has shown strong, consistent demand growth for gas in Israel driven by general economic growth, demographics growth, electrification of industries and transport. We see the current state of the Israeli power market as being balanced, very close to having no surplus capacity.
There are concerns about that margin, and you will see that some of the coal-fired stations which should have been retired by now are being retained. There was a hiccup in the privatization process for IEC such that the most recent station was -- has not been able to be sold, so there is demand there that IEC might not have expected to have had to meet. And obviously, we now have a commercial relationship with them, which we didn't before.
Two new power stations are being supported by the government for construction, Dorad 2 and [ CSM ], and they're both going to be big, new, 800-megawatt type stations coming onstream just after the middle of the decade, '27, perhaps. Both of the proponents of those power schemes are existing customers of ours with whom we have very good relations, so we will be no doubt speaking to them over the long term.
For us, the issue is, as Matthaios said, the timing and the economics of any expansion of the FPSO, or once we've addressed -- understood the machine properly, seeing what we can get to in terms of full growth. 800 million cubic feet a day, I'll remind the technically-minded, is the capacity of the FPSO, which is actually slightly more than 8 bcm a year equivalent. It's about 5% more on the basis of the calorific value of the gas.
So we see strong growth in Israel. It's still a very, very core market for us despite the fact, obviously, we have a focus on exports because they are currently higher prices. But also say that the -- as our finance -- Head of Finance has well reminded me, we have very, very strong credit-worthy customers in Israel who pay their bills and pay them on time, so we have no receivables' issues there at all. It's just good steady cash flow.
Let me just add one wider comment here on what's happening in the EastMed, because I think that's defining our future strategy. Indeed, there are expansion projects from others, and we are looking to drill more wells and expand our capacity as well. But what we do see in a wider picture, we see Israel growing from the current levels to closer to 20 bcm. We see Egypt steadily and increasing demand more than 60 to 70 bcm. We see Jordan demand. So just the region, just the local 3 countries that I mentioned, will be consuming close to 100 bcm in the years to come.
Beyond that, we have the 2 LNG terminals, [indiscernible] that can export. And we have continuous meetings, trilateral, bilateral. Just yesterday or 2 days ago, Greece, Cyprus and Israel met in Cyprus to talk about energy cooperation and how the gas from the EastMed can reach Europe, either through the LNG terminal in Egypt all through new infrastructure in Cyprus. Once and when and if this infrastructure is in place, the market that we will be looking at is significantly higher. So a market that has lost 150 bcm from Russia is replaced by global LNG, but with the closest gas supply that can fill that gap being the estimate.
So am I concerned about demand of gas from the region? Absolutely not. The big challenge for all of us is to find the export infrastructure and capacity, and that's why Nick mentioned the Nitsana pipeline that would bring us into Egypt and the export market, and we're looking also at other projects in Cyprus and other parts of the Mediterranean to tap that very, very big gas demand that we see coming from the wider region. The wider region, I also include now the South European countries.
So absolutely no issue, in my view, about demand of gas. But we need to be, as Nick said, very careful with who we contract, what is the credit-worthiness of the counterparty, and making sure that our working capital and cash stays in line with what we plan to do, and that is part of our robust and very conservative financial policy.
Also, a quick comment on the dividend policy. Panos covered it exceptionally well. I think I read what everybody says, dividend policy stays in place. But what Energean is all about is the 3 pillars that we talked about over and over again: returning money to shareholders, at the same time, keeping leverage at reasonable levels, and eyes focused on growth to continue the journey that started from 1 million barrels back in 2007 when we started the business to 1.4 million barrels today. That's the type of growth that we're used to, that's what we're planning to do going forward.
Will we be able to continue at the same pace? Obviously, not because we are a very different company today. But growth is in our DNA, and that is what we're planning to do going forward at the right time, and at the right price. We are not there, and I remind everybody that this company has a management team that is fully aligned with shareholders, being the management team that has the largest shareholding of the company compared to anybody else. So we will be focused on growth, but at the right time and at the right price. And we've demonstrated as a management team that every time we've done a deal, whether it was the acquisition of Prinos, the acquisition of Edison, the acquisition of Karish, it has been at the right time and at the right price.
And every time that we've developed a project, like when we did Karish and we did those wells at very low drill rates, it was the right time of the market. And at this point in time, we're not rushing to do anything because the situation that we see around us, with respect to price inflation and everything, is of concern, and we will not be rushing to go and spend shareholder funds at the peak of the cost cycle and the inflation cycle. So we will continue to be extremely conservative and continue to target growth and return to shareholders from the projects we have or anything else that we see in our region.
[Operator Instructions]
We will now take the next question from the line of [indiscernible] from [indiscernible].
I just wanted to check if you're still experiencing payment issues in Egypt? You get your dollar payments, or do you get local currency? So how is the payments and receivable situation there? That's question number one.
And second one, just quickly check on the user process of the bond, which was placed in summer. So do I understand correctly that nothing was actually upstreamed to Energean plc, and the use of [indiscernible] were directed directly from the Energean Israel for -- including Kerogen payments?
Yes. On Egypt, I think we can say that the receivable situation is definitely not improving. I would say, it has stabilized versus last year. We have an increase in the overdues, but still, I would say, it's within control and within the range of our sensitivities. I don't have any update what is the trajectory. Definitely, we are monitoring this very carefully. We are getting paid, but we're not getting paid at the rate that we are producing and what we were used to in '21 and '22. This is one aspect that we are focusing, but for the time being, both the status and the immediate trajectory is not worrying us. If you want specific numbers, I think the overview right now is around $80 million. It is an increase of $25 million versus the end of 2022.
Now when it comes to the use of proceeds of the bond, you're right. The rate that we have done is in Israel. Funds will stay in Israel, with the exception of $75 million that will be used for the redemption of the $150 million payable we have to Kerogen. So all the funds that we are raising through bonds in Israel stay within the Energean Israel subsidiary under the very well-known non-recourse structure that we have been using the last few years.
Does that cover your question?
Yes.
We will now take the question from James Carmichael from Berenberg.
Just one question from me, if I may. Just on the Israeli Electricity Corporation gas pricing set in the country. I think last time I heard, it was at $4.60. I might have missed this, but just wondering when -- next year, where that's going to go? I appreciate you've obviously got the full pricing in your contracts, but what was the sort of price situation in the country?
So if I understand you correctly, you're asking about the IEC gas price that...
Yes.
So obviously, they were historically, the dominant buyer and generator in Israel. They're now not. The private sector produces more than half of the electricity, and obviously, therefore, to the extent that most of it is gas-fired by most of the gas. IEC's long-term contract, to the extent that we can define, they have been taking opportunity to, if you like, reprice that with our entry into the market. So obviously, they probably think we're wonderful. We have the spot arrangement with them to help them cover short-term variations in demand. And also, it will help them in terms of the, if you like, the medium term. The rest of this year, with the unexpected need to supply communities by the Israeli power station.
Underlying the pricing structure for the independent sector is, I think what you might also be bringing to, is what we call the PT index, which is the input index to -- for cost of generation for IEC, and that drives a number of our contracts which are indexed to that link. I think we would see that holding steady. I think we had the [indiscernible] prioritization gone ahead and those receipts gone to IEC, we perhaps have seen it go down. Israel still buying quite a substantial amount of coal.
I think, in their recent reports, about 25% of their demand was coal but a considerably larger portion of their expenditure, so I think you can look at world coal prices as well. So I think I see PT being steady in the short term. And it becomes almost, if you like, a self-fulfilling cycle. The more IEC buy power from independent producers, that goes into the mix as well. And to the extent those prices are linked to PT, then it reinforces a fairly steady inflation-linked growth to prices.
Great. And maybe one just sort of a follow-on to Matthaios, if I can. I think when you were talking about M&A there, maybe it sounds a bit more bullish than I was expecting around or ambitious maybe than I was expecting. I think previously, might have thought that the M&A strategy, sort of near-field tiebacks and that sort of target in existing jurisdictions. But it feels like maybe not right now, but the ambition is bigger than that. Should we be thinking sort of medium-term, new country entries, that sort of thing?
Well, James, if ambition is the driver, I think when we started Energean, the ambition was to make it the leading independent E&P producer in the Med, and we are probably there. The ambition now is to continue the growth and double the size of the company over the next years. So whether that will happen through the drill bit or through acquisitions, that will be depending on what we've seen in front of us.
As I said, clearly focused on gas, not afraid of oil. We are producing substantial amounts of oil. Just from Israel, we will be producing close to 30,000 barrels of liquids, but gas still remains the main target. And Med is a country that we know. We know the rocks, we know the geopolitics, we know how to navigate around governments and complex issues, so we feel very comfortable to do more in the Med. Will we go outside the Med? I think it's too early to tell our strategies to look at the opportunities in the region.
New country entries. There are countries that we feel comfortable to go to, and we are looking at opportunities there. But as I said earlier, our driver always is and will continue to be the right deal for the shareholder. We're not doing deals just for the sake of doing a deal and saying as a management team that we're busy, because we are shareholders, and everything we do has to add value to the shareholder. And our ambition, yes, we are, and we will continue the growth. This is -- the journey is not stopping here.
There are no further questions at this time. I would like to hand over to Matthaios Rigas for final remarks.
Thank you very much for participating. Thank you for the questions on market strategy, clarification on technical issues. We are, as I said as always, firmly targeting to recreate the liability, get as much gas out of our FPSO and the rest of the projects, get to our 200,000 barrel a day target. And I remind again, and I will be talking about this over and over again, the 3 pillars: return to shareholders, focus on deleveraging and continuous growth. That's what Energean is all about.
So thank you very much for participating, and I look forward to seeing you very soon. Thank you.