Tamar and Leviathan fields contain valuable gas condensate. The condensates in the two reservoirs have not yet been priced, but are estimated at an additional $3 billion, on top of the reservoirs' current valuations. The Tamar and Leviathan natural gas fields include 35 million barrels of condensate, report Delek Group Ltd. (TASE: DLEKG) units Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) in their financial reports for 2012, published on Friday. The figure is a considerable upward revision of the amount of condensates, which have not yet been priced in the reservoirs' valuations. The companies also revised upward the amount of gas at Tamar by 3% to from 9.7 trillion cubic feet (TCF) to 10 TCF.
Delek Drilling and Avner each own 15.67% of Tamar, 22.67% of Leviathan, and 25% of Yam Tethys.
Delek Drilling and Avner's financial results were unexpectedly good. Both companies posted handsome profits, despite the huge investments in developing the Tamar reservoir and moving forward on the Leviathan reservoir. Delek Drilling's net profit fell to $14.6 million in 2012 from $70.1 million in 2011, due to a sharp drop in gas sales from 4.3 billion cubic meters (BCM) in 2011 to 2.5 BCM in 2012. Avner's net profit fell to $9.9 million in 2012 from $67.8 million in 2011. Delek Drilling's cash flow fell to $36.2 million in 2012 from $102.4 million in 2011, and Avner's cash flow fell to $48 million from $113.6 million.
The decline in profits was due to the depletion of Yam Tethys's Mari B well and the heavy investment for developing the Tamar field, as well as the Noa and Pinnacles fields. The company's financial results should begin to strongly improve from April, when gas flow from Tamar to the Israeli market is due to begin.
Condensate are liquid hydrocarbons obtained during gas production, and which is used by the petrochemicals industry for the production of refined oil products for the fuels industry. The price of condensate is several times higher than the price of natural gas, approaching the price of crude oil. In a report published earlier this month, Clal Finance analyst Yaron Zer estimated the value of condensate at over $3 billion (uncapitalized). He estimates that the condensate will be sold at an average price of over $90 per barrel (not including production costs, taxes, and other expenses). On Friday, he said that the data was first published in a presentation by Noble Energy Inc. (NYSE: NBL) in late 2012.
The condensate update at Tamar and Leviathan was based on the processing of the production test results carried out over the past year at the reservoirs. In November 2012, the Tamar partners signed a commercial agreement to sell condensate to Paz Oil Company Ltd. (TASE:PZOL). The value of the five-year contract is $35 million. The price in the contract was based on the price of Brent crude, less the margin set in the supply agreement.
Netherland Sewell & Associates Ltd. (NSAI) estimates that Tamar has 13 million barrels of condensate, at a ratio of 46,000 barrels per 1 BCM of natural gas. It estimates that Leviathan has 22 million barrels of condensate, at the same ratio. The two reservoirs have an aggregate best estimate 35 million barrels of condensate, and an aggregate high estimate of 41.6 million barrels (P3 - proved + probable + possible reserves at Tamar and 3C contingent reserves at Leviathan).
Condensate is a natural product of the condensation process of natural gas, and which requires minimal treatment (stabilization) at low cost to deliver to customers for use as an additive in oil refining or as fuel by heavy industry (such as cement), or as raw material in oil refining. The global price of condensate is around the price per barrel of Brent crude oil.
Published by Globes [online], Israel business news - www.globes-online.com - on March 17, 2013
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