Tamar stake sale boosts Delek Drilling profits

Leviathan gas field Photo: Noble Energy
Leviathan gas field Photo: Noble Energy

Delek Drilling reported an $819 million profit for 2017, compared with $327 million in 2016.

The sale of 9.25% of its holding in the Tamar natural gas project in 2017 for $980 million caused a leap in Delek Drilling Limited Partnership's (TASE: DEDR.L) profit in 2017. The partnership, controlled by Yitzhak Tshuva's Delek Group Ltd. (TASE: DLEKG), today reported an $817 million profit for 2017, compared with $327 million in 2016.

The reduction in Delek Drilling's stake in Tamar (the partnership now owns 25.8% in Tamar directly or indirectly), combined with its continued investment in development of the Leviathan project, in which Delek Drilling owns 45.3% of the rights, caused a 7.3% dip to $502 million in the partnership's revenue and a 34% rise to $148 million in miscellaneous expenses in 2017. Delek Drilling's financing expenses, on the other hand, dropped 53% to $28 million.

The partnership benefited last year from a 4% increase in consumption of natural gas in Israel. The quantity of gas from the reservoir sold in 2017 was 9.7 BCM, out of a total consumption of 10.4 BCM in Israel.

In development of Leviathan, Delek Drilling notes that since the final investment decision (FID) in February 2017 to develop the first stage of the reservoir at a cost of $3.75 billion, over 40% of the development has been completed, and $1 billion has actually been invested in the project.

Drilling in the lower part of the Leviathan 3 and Leviathan 7 drillings will commence in the coming weeks, after which all four of the initial production drillings in the field (Leviathan 3,4,5, and 7) will be completed. The possibility of drilling for deep purposes (oil) will be considered later.

Concurrently with the publication of Delek Drilling's financial statements, a revised resources report for Leviathan has been published setting the quantity of proven reserves (1P) in the Leviathan reservoir at 9.4 trillion cubic feet (TCF), the quantity of proven and expected reserves (2P) at 12.65 TCF, and the total including contingent resources (C2) in the first stage at 17 TCF. The total quantity of gas in the reservoir (reserves, contingent resources in the first stage, and future development) was left unchanged at an estimated 21.4 TCF.

The companies and partnerships involved in the project (Noble Energy, Delek Group through Delek Drilling, and Ratio Oil Exploration (1992) LP (TASE:RATI.L)) recently reported that the contingent conditions in the agreement for the sale of gas to the Jordanian National Electric Power Company (NEPCO) had been fulfilled. This agreement provides for the sale of 45 BCM over 15 years.

The gas pipeline to Jordan, which will connect the Leviathan reservoir to the Jordanian natural gas transportation system and the Pan-Arab pipeline (which also reaches Egypt), is currently under construction, and is slated for completion by the time production of gas from Leviathan begins in 2019.

Delek Drilling CEO Yossi Abu said today, "We are seeing substantial growth potential based, among other things, on growth in local demand for natural gas resulting from the reduction of coal in the basket of fuel for electricity, the introduction of natural gas and electricity into transportation, and the installing and construction of natural gas-based industrial plants, such as the possibility of building an aluminum manufacturing plant. This comes on top of increased demand for natural gas in Jordan and Egypt, and the possibility of supplying gas to liquefaction facilities in Egypt through a joint project for the Leviathan and Aphrodite reservoirs, among other things."

Published by Globes [online], Israel Business News - www.globes-online.com - on March 21, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Leviathan gas field Photo: Noble Energy
Leviathan gas field Photo: Noble Energy
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