In the face of the outcry by investors in Givot Olam Oil Exploration LP (TASE:GIVO.L) and the heads of the partnership against the economic press, and against "Globes" in particular, allow me to set matters straight: we would be delighted to discover that there is a large quantity of extractable oil in the field being drilled by Givot near Rosh Haayin that could contribute to making Israel's economy flourish.
Allow me also to wager that most of us journalists, if not all of us, are no experts in geology. It is likely that if you were to put us in front of Givot's engineering report, we would be able to make no sense of it.
However, if we have learned one thing over the years, it is to interpret investor behavior, and to spot warning signs that come one after another. These signs have lately been noticeable in the way Givot and its investors have conducted themselves.
One such sign arose from Givot's behavior in the afternoon of last Tuesday. In an unprecedented move, the partnership decided to publish a letter from its legal counsel, Adv. Chaim Indig, in which he attacks the action taken by the Israel Securities Authority, which halted trading in Givot.
Criticism is legitimate of course, and even the regulator is subject to it. But when it emerges that the partnership decided to publish Indig's letter rather than an announcement of the findings of the engineering report on the Meged 5 drilling, which the Authority had allowed it to publish and which investors were impatiently awaiting, it makes one wonder.
Publication of the findings of the final engineering report was delayed until 16:18, when it was too late to reopen trading in Givot's partnership units, so that, because of the Sukkot holiday, four more days passed without trading.
It is not inconceivable that the partnership sought to meet its investors before trading was resumed, to prevent a collapse in its value, given the apparently unexciting findings of the report. Evidence of that was forthcoming at the best show in town on Friday at Kfar Maccabiah. Tuvia Luskin, the entrepreneur behind the partnership, is not only a successful geologist. He is also a charismatic speaker, who knows how to whip up the enthusiasm of his investor audience. The support he won at the gathering called by Givot was a rare sight for the local capital market.
An even more glaring warning sign, which Givot Olam's investors are perhaps trying to deny, is a single line in the engineering report that Givot published: "The general partner does not have the expertise required to estimate probabilities in ways that are the norm in the oil industry. The general partner has not received and does not possess an expert opinion on this matter."
Givot admits, under instructions from the Israel Securities Authority, that despite the findings of the report, it is simply incapable of deducing the probability of producing oil from the Meged 5 drilling. In simple terms, it is not a matter of Givot's management being unwilling to estimate the probability, but of its inability to do so.
Published by Globes [online], Israel business news - www.globes-online.com - on September 26, 2010
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