Energean's 2024 Earnings: Revenue Surge, EPS Disappointment

Energean (LON:ENOG) has just released its full-year 2024 earnings, and the results are a mixed bag. While the company managed to beat revenue expectations by a whopping 32%, earnings per share (EPS) fell short by 26%. Let's dive into the details to understand what's driving these numbers and what it means for investors.

Revenue Performance: A Bright Spot

Energean's revenue for the fiscal year 2024 came in at US$1.31 billion, a 7.4% decrease from the previous year. However, this figure exceeded analyst estimates by 32%, which is a significant achievement. The primary driver behind this revenue was the Israel segment, contributing a total of US$1.24 billion, or 94% of the total revenue. This highlights the strategic importance of the Israel market for Energean.



EPS Miss: The Dark Cloud

Despite the revenue beat, Energean's EPS for the year was US$0.63, down from US$1.04 in the previous year. This 26% miss in EPS estimates is a cause for concern. Several factors contributed to this shortfall:

1. Lower Revenue: The 7.4% decrease in revenue from the previous year directly impacted the company's net income and, consequently, its EPS.
2. Higher Cost of Sales: The cost of sales amounted to US$702.4 million, or 53% of total revenue. This high cost of sales significantly impacted the company's earnings.
3. Non-Operating Costs: Non-operating costs totaled US$272.1 million, indicating that a significant portion of the company's costs is related to non-core activities.
4. Exploration Write-offs: Energean incurred a US$120 million write-off in Morocco and Egypt due to unsuccessful exploration efforts. This write-off directly impacted the company's net income and EPS.

Industry Benchmarks and Future Outlook

Energean's revenue performance is notable when compared to the broader Oil and Gas industry in the United Kingdom, where revenues are expected to remain flat. Looking ahead, revenue is forecast to grow by 5.3% per annum on average during the next three years. However, the company's shares are down 7.2% from a week ago, reflecting investor concerns about the EPS miss and other uncertainties.



Risk Analysis: What Investors Need to Know

Energean has several warning signs that investors should be aware of:

1. Carlyle Transaction Uncertainty: The Carlyle transaction remains uncertain, causing frustration among employees and stakeholders due to a lack of clarity.
2. High Net Debt: The company's net debt remains high at US$2.95 billion, although it has decreased from previous levels.
3. Future Dividend Policy: There is uncertainty regarding the future dividend policy, which is dependent on the outcome of the Carlyle transaction.
4. Project Delays: The Epsilon project in Greece has been delayed to the second half of 2029, with its future dependent on government support and alignment with carbon storage initiatives.

Conclusion: A Cautious Outlook

Energean's 2024 earnings report is a tale of two halves. While the revenue beat is a positive sign, the EPS miss and the various risks facing the company warrant caution. Investors should keep a close eye on the Carlyle transaction and the company's future dividend policy. As always, it's crucial to do your own research and consider your risk tolerance before making any investment decisions.

Stay tuned for more updates on Energean and other exciting investment opportunities. Happy investing!