Woodside buying 30% of Leviathan for $2.5b

The deal values the Leviathan natural gas reserve at $8.3 billion. It was first reported by "Globes".

As first reported by "Globes", Australian company Woodside Petroleum (ASX: WPL) is buying 30% of the rights in the Leviathan reserve for $2.5 billion, and it will be a strategic partner in the drilling. The details of the buyer and the expected price were first revealed in "Globes".

News of the deal has boosted prices of the participation units of the Leviathan partners on the Tel Aviv Stock Exchange. Ratio Oil Exploration (1992) LP (TASE:RATI.L) is up 13%.

Under the terms of the deal, which has been agreed in principle, Delek Group Ltd. (TASE: DLEKG), controlled by Ytitzhak Tshuva, will sell 15% of the rights in the licenses for $1.281 billion. Noble Energy will sell 9.66% of the rights in the license for $802 million, and Ratio will sell 5% of the rights for $417 million. The consideration will be paid in stages. On the signing of the deal, Woodside will make an advance payment of $696 million.

The deal values the Leviathan natural gas reserve at $8.3 billion.

Woodside is the largest operator of oil and gas production in Australia. It will be the operator of any LNG development of the Leviathan field, while Noble Energy will remain upstream operator. Noble Energy targets initial production to the domestic gas market in 2016. A pre-FEED (front-end engineering and design) assessment for an LNG project is underway.

Woodside CEO Peter Coleman said the agreement was a significant step towards realizing Woodside’s ambition to secure world-class growth opportunities.

"We have a proven track record of safe and reliable operations in Australia and being selected as the Leviathan Joint Venture’s preferred partner in a competitive bidding process demonstrates the value of our LNG development capabilities,” Mr Coleman said.

"Acquiring an interest in these permits is an exciting opportunity to grow our portfolio in the emerging Eastern Mediterranean basin and we look forward to finalizing the agreement.”

Woodside has offered the following contingent payments: a payment of $200 million once laws permitting LNG export from Israel are in force; a payment of $350 million on a final investment decision in relation to an LNG development; potential annual LNG revenue sharing payments equal to 11.5% of Woodside’s incremental revenue above an agreed escalating price threshold, over the life of the project (capped at $1 billion); carry of expenditure up to $50 million in relation to costs associated with the drilling of a deep oil exploration well targeted for late 2013.

Woodside cautions that the agreement is subject to a number of conditions, including execution of fully termed agreements, completion of confirmatory due diligence and obtaining the necessary government and regulatory approvals.

When the deal is completed, Woodside, Noble Energy and Delek Group through its units Delek Drilling Limited Partnership (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L) will each hold a 30% stake and Ratio will hold the remaining 10%.

The entry of Woodside is a major breakthrough for Israel's gas and oil exploration market. The Australian company is a global leader in setting up LNG projects and this will enable the export of Israeli gas to Asia.

The deal was signed even though the Israeli government has not yet adopted the recommendations of the Tzemach Committee on gas exports. Woodside was selected after a competitive process over the past year, which included other major international companies such as Russia's Gazprom JSC (RTS: GAZP; LSE: GAZD; DAX: GAZ).

Ratio CEO Yigal Landau said that the entry of Woodside will have significant influence on Israel's energy exploration sector and entire economy. He said, "The partnership with Woodside strengthens Ratio's equity and financial robustness and allows us to diversify options for raising capital in the future to finance the Leviathan and the Gal permits, which we expect to receive and move ahead with exploration activities in the field."

Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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