Delek Drilling Limited Partnership (TASE: DEDR.L) today published a revised report on reserves and contingent resources and discounted cash flow (DCF) figures. Leading resources assessment company NSAI drew up the report. Like the preceding reserves and resources report published in March of this year, and in accordance with the prevailing global practice, some of the resources in the reservoir are classed as reserves, and some as contingent resources.
The report therefore has two parts: a report on confirmed reserves for development, and a contingent resources report that includes both confirmed reserves and contingent resources at the 1A stage of developing the reservoir.
In February, the Leviathan partners made a final investment decision to carry out stage 1A of the plan for developing the reservoir. This stage is designed to produce 12 BCM of gas annually, starting in the fourth quarter of 2019. Development costs in the plan amount to $3.75 billion.
The revised estimate for reserves and resources was prepared on the basis of the drilling, assessment, and production figures for Leviathan 5, which ended in July 2017. The drilling confirmed the presence of natural gas in three layers of the reservoir (A, B, and C), matching the operator's earlier assessment.
Given the array of data obtained in the drilling, the total resources in the reservoir were accordingly estimated at 21.4 TCF (605 BCM). The Leviathan 5 figures were sent to the Ministry of National Infrastructure, Energy, and Water Resources for use in revising the estimates for the quantity of resources in the Leviathan reservoir in order to calculate export permits.
The revised DCF reflects a current value of $7.4 billion for the Leviathan reservoir at a 10% discounting rate. Delek Drilling's 45.34% stake in the reservoir is therefore worth an estimated $2.9 billion. This value reflects a 10% increase in the current value of the reservoir, and an 11% increase in Delek Drilling's share, compared with the previous estimated DCF. Among other things, the increase in the reservoir's value is due to the fact that the date for production from the reservoir is nearing, and to the fact that the Leviathan partners invested $500 million in January-August 2017 out of the total investment needed by the beginning of production in late 2019.
Delek Drilling CEO Yossi Abu said, "Today, more than ever, the Israeli public realizes the importance of developing additional gas reservoirs, especially Leviathan. Development of the Leviathan reservoir will give the Israeli energy sector a safety cushion, and facilitate the assimilation of the natural gas revolution - the transition to cheaper and cleaner electricity production. We have lost valuable years in useless delays, but since the gas plan was approved, the Leviathan partners have been acting with determination to supply gas to the local economy and commence exports, starting in the second half of 2019."
Published by Globes [online], Israel Business News - www.globes-online.com - on September 26, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017