Delek Group Ltd. (TASE: DLEKG) announced this morning that it had signed a strategic agreement for collaboration with GulfSlope Energy and Texas South Energy that gives the group the right to carry out drillings in nine areas of the Gulf of Mexico with an average probability of finding a discovery of 40%. This is the first time that Delek Group has embarked on oil and gas exploration in the Gulf of Mexico. "This is a strategically important day on the way to us becoming a major player in the international energy market," said Delek Group controlling shareholder Yitzhak Tshuva.
The company said that the drillings would be carried out gradually, in stages, in accordance with the results of the drilling at each stage, and that they were expected to begin in the first half of this year. The group will invest up to $50 million in the first two prospects.
Under the agreement, Delek Group will be entitled to 75% of the rights in each of the twelve licenses in exchange for 90% participation in the exploration costs from the date that the binding agreements are signed until the end of the first drilling in each license.
The deal is structured in a stepped fashion, with Delek Group reserving the right to decide whether to proceed with the drillings beyond the two initial drilling areas, in accordance with the actual findings.
In addition, for two years from the closing of the deal, Delek Group has an option to buy shares in each of the partners in four stages (determined by progress in drilling the wells), up to a total stake of 20%, and at a 10% discount on the market price.
Delek Group further stated in its announcement that more than 1.8 billion barrels of oil and gas had been discovered to date in the designated areas. According to an estimate prepared for Delek Group by international consultants NSAI, in seven prospects examined in depth, there is potential for the equivalent of 423 MMBOE (million barrels of oil equivalent), while the estimated cost of production is low because the drillings are in shallow waters.
GulfSlope Energy and Texas South Energy are OTC-traded companies specializing in location and development of oil and gas assets on the continental shelf of the Gulf of Mexico.
Delek Group CEO Asaf (Asi) Bartfeld said, "Our entry into the US energy market represents an important quantum leap in the strength of Delek Group's international activity and a further step in implementing the group's strategy for consolidating its standing in the international market. In the partnership with the American companies and their managements there is synergy with the group's other activities, and potential for expanding our portfolio of holdings in the international market while strengthening our knowledge and experience in these markets."
Published by Globes [online], Israel business news - www.globes-online.com - on January 8, 2018
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