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Directors’ Deals: Energean founder cuts stake

It is in Israel that Energean’s prospects and most of its assets lie. The oil and gas production and exploration company’s flagship Karish gas development project, offshore Israel, should produce its first gas by the third quarter of 2022 with its floating production system now almost complete after a pandemic-hit delay.

The company forecasts that Israel production will be 25-30 kilo barrels of oil a day (kboed) in 2022, outstripping the numbers in its other locations such as Egypt and Italy, as the company works towards its medium-term targets of hitting 200 kboed and $2bn (£1.5bn) annual revenue.

The share price has rebounded after tumbling in the summer of 2021, and is up again after a recent trading update. That update, covering the 12 months to December 31, revealed that Energean expects to post record final financial results for 2021, with revenue up by almost a half to $495mn and core earnings hitting $200mn. The top line was buoyed by higher than anticipated production levels and soaring gas prices.

While this was good news, longstanding concerns over Energean’s debt levels remain. The company’s guidance is for consolidated net debt to rise to $2.6bn-$2.8bn this year, up from $2bn in 2020. Over $3bn of debt was raised from the markets across 2021.

Despite the trading update’s positive noises on revenue and growth, Cyprus-domiciled OilCo Investments Limited — a PCA (“person closely associated”) of Energean founding partner and non-executive director Efstathios Topouzoglou — sold £6mn worth of shares in five transactions between 18 and 20 January.

The prudence of the timing of these disposals, of course, remains to be seen. With over $1bn in liquidity to draw on, Karish to start pumping out barrels, and progress being made with other development projects, it wouldn’t surprise if 2022 proves to be another record year for Energean. But the debt overhang can’t be ignored.

THG director joins the sell-off

THG is having a rough time of things. The ecommerce specialist’s shares have lost more than 80 per cent of their value over the past year amid mixed results, market uncertainty over plans to spin out its beauty business, corporate governance concerns, and asset manager BlackRock halving its stake.

The company’s recent trading update, for the fourth quarter to December 31, didn’t help. While THG announced record annual revenue of £2.2bn, it advised it would miss profit margin targets. The adjusted margin before interest, taxes, depreciation and amortisation will be around 7.4-7.7 per cent, against market forecasts of 7.9 per cent, a downgrade which the company pinned on 90 basis points of “adverse foreign currency movements”. 

Market excitement over the company’s technology services division Ingenuity has also dimmed somewhat, despite year on year sales growth of 43 per cent. Japanese conglomerate SoftBank holds an option to buy a 20 per cent stake, though this now appears increasingly remote.

It’s fair to say that it probably won’t cheer investors to hear of a significant share sale which involves chief executive Matthew Moulding and group commercial director Steven Whitehead.

Moulding’s Guernsey-domiciled investment vehicle FIC Shareco Limited sold 6.9mn THG shares on January 26. The shares, beneficially owned by Whitehead, were disposed of at a price of 123p for a total consideration of £8.5mn. Investors can only hope that his reasoning wasn’t to sell due to concerns around potential further declines in the share price.

While margins are expected to recover as this year progresses, with automation helping with inflationary pressures, THG has an uphill struggle to regain the confidence of the market. The company has also been hit by a wider sell-off in technology stocks in early 2022, as cryptocurrency prices have plunged.

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