Avner founder Eli Rosenberg sells third of rights

Geologist Dr. Eliahu Rosenberg, the founder of Avner Oil and Gas LP (TASE: AVNR.L), has sold a third of his royalty rights to Allied Holdings Ltd., managed by Itzhak Swary CPA. Rosenberg will reportedly receive $40 million. Rosenberg was guaranteed a super royalty of 2.65% of Avner's revenue from oil and gas sales.

Avner is a partner in all of Israel's natural gas discoveries. Its holdings include 22.67% of Leviathan, 15.625% of Tamar, and 26.4% of Tanin.

Sources inform ''Globes'' that the parties in the deal recently asked the Petroleum Commissioner for permission to transfer the rights. Energy market sources believe that the deal was priced at a value similar to the value at which Yitzhak Tshuva acquired the controlling interest in Cohen Development & Industrial Buildings Ltd. (TASE: CDEV), which owns 2.875% of the rights in Avner, in late 2011.

On this assumption, Rosenberg's rights in Avner are worth $140 million, and the value of the third sold is $46.67 million. Tshuva paid NIS 275 million for 51% of Cohen Development, which owns two other assets in addition to the super royalties: 0.9% of the participation units in Avner ( from which it derives dividends), and 50% of the general partner (from which it derives income from management fees).

Rosenberg, one of Israel's top geologists, founded Avner with David Cohen in 1991. At the time, they decided that they would be eligible for super royalties of 6%, which they would share equally. This is a low rate in the industry. Rosenberg and Cohen later agreed to allocate part of the super royalties to Joe Elmaliach of JOEL Jerusalem Oil Exploration Ltd. (TASE: JOEL), who employed Rosenberg as a consultant to his company. Elmaliach originally received a super royalty of 1%, but after the Mari B discovery in 2000, his share was halved to 0.5%. Over the years, Rosenberg received an estimated NIS 20 million in royalties on revenue of the Yam Tethys developer on gas sales from Mari B.

Dr. Rosenberg (85) was born in Berlin in 1928 and immigrated to Israel in 1933. He served in the 1948 War of Independence and went to study geology in Switzerland. After completing his doctorate, he returned to Israel and worked as chief geologist for several government oil exploration companies. In the 1980s, he was a partner in the founding of Isramco Negev 2 LP (TASE: ISRA.L) and JOEL, and helped Jewish oil tycoon Armand Hammer in his first offshore explorations. Avner was founded by Rosenberg with David Cohen and his nephew, Gideon Tadmor. The first gas discovery, Noa, was named for Rosenberg's daughter. Tadmor is now the CEO of Avner.

Rosenberg was a consultant for Delek Drilling LP (TASE: DEDR.L), and persuaded the company to drill in the license where the Mari B discovery was made. Mari B supplied two-thirds of Israel's natural gas consumption in 2004-12.

Published by Globes [online], Israel business news - www.globes-online.com - on March 24, 2014