Woodside to pay more for smaller Leviathan stake

Woodside Petroleum is prepared to acquire 25% of the Leviathan natural gas field, instead of 30%, for a higher price than previously agreed.

Sources inform ''Globes'' that Woodside Petroleum Ltd. (ASX: WPL) is prepared to acquire 25% of the Leviathan natural gas field, instead of 30%, even as it has agreed to pay more, although the final price has not yet been decided. The two changes have greatly increased Leviathan's value, assuming a deal is closed. They will also increase the stakes of the two Israeli partners in the gas field Delek Group Ltd. (TASE: DLEKG) and Ratio Oil Exploration (1992) LP (TASE:RATI.L), and strengthen their position in any future decision making. Noble Energy Inc. (NYSE: NBL) of the US is Leviathan's third partner.

Last week, "Globes" reported that Delek controlling shareholder Yitzhak Tshuva told a closed-door company meeting that the Woodside deal was very close to being signed, a year after Leviathan's partners signed the letter of intent with the Australian energy company. Following the report, Delek stated that the negotiations were not over, nor was there any assurance that a deal would be reached requiring the transfer of rights.

However, sources say that the gaps between the parties are narrow, and that there was a strong probability that a deal would be reached on the main issues within days. In addition to a smaller stake in Leviathan and a higher offer, Woodside is prepared to pay a premium if gas contracts are signed with countries in the Middle East, such as Egypt and Turkey.

In the letter of intent from December 2012, Woodside agreed to acquire 30% of Leviathan for $1.25 billion in cash. $696 million would be paid when the deal was signed, and the rest would be paid later. Woodside also agreed to pay up to $1 billion more if gas was exported at a price above the floor price. The offer reflected a value of $4.7-5.1 billion for Leviathan, not including the premium.

An agreement with Woodside will enable Israel to export liquefied natural gas (LNG) to the Far East, probably via a floating LNG vessel. In an interview with "Globes", Woodside CEO Peter Coleman said that the company was bringing to the deal its customer base in China and other countries. The cost of shipping LNG to the Far East would raise the end price by up to $1.30 per million BTU, but swap deals could offset the tyranny of distance by selling Israeli gas to customers in the Mediterranean Basin in exchange for changing the addressee of future gas shipments.

Published by Globes [online], Israel business news - - on January 6, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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