Delek: 60% of Leviathan development completed

Leviathan gas field Photo: Noble Energy
Leviathan gas field Photo: Noble Energy

Gas production declined 27% in the second quarter but CEO Asi Bartfeld says Leviathan production will begin next year and talks are progressing for an Egyptian deal.

Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, today reported its results for the second quarter and first half of 2018. The group's revenue totaled NIS 2.07 billion in the second quarter, 28% more than in the second quarter of 2017.

The group posted a NIS 274 million net profit from discontinued activities (mostly revaluation of the Tanin and Karish natural gas reservoirs, profits by The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), and an offering by Delek Royalties). Net profit in the quarter was NIS 170 million, down 5.5%, compared with the corresponding quarter last year.

Delek Group finished the first half of 2018 with NIS 3.8 billion in revenue, 22% more than in the corresponding period last year. Its net profit inched up 3% to NIS 413 million.

Revenue from natural gas production declined 27% to NIS 683 million, and its contribution to the group's net profit dropped 12% to NIS 207 million. Revenue from Canadian company Ithaca Energy, which Delek Group gained control of last year, leaped 420% to NIS 519 million, but the net profit that it produced plummeted 62% to NIS 21 million. Revenue from fuel marketing activity in Israel grew 2% to NIS 2.4 billion, and the contribution of this activity to net profit grew 28% to NIS 59 million.

Delek Group CEO Asaf Bartfeld said today, "We continued the group's strategy in the current quarter by focusing resources on expanding business activity in energy in Israel and overseas. Several days ago, we reported an important strategic deal by Ithaca - the use of its own resources to acquire its partners' holdings in the large Stella reservoirs. This deal will substantially increase Ithaca's production capacity from Stella, cut production costs, and give the company full control and ownership of the reservoirs' production facility as part of our plan for expansion and preparing Ithaca for registering for trade overseas."

Bartfeld added, "As of the date on which the reports were published, 60% of the development of the Leviathan reservoir had already been completed. Teams are working hard on schedule and within the budget in preparation for the arrival of the production platform in Israel within four months and the beginning of production from the reservoir in 2019. The negotiations with our Egyptian partners are making progress, and we hope to sign a deal to acquire rights in the EMG pipeline in the near future, which will make it possible to carry out the agreements to sell gas to Egypt."

Revenue in the second quarter from North Sea oil production activity through Ithaca totaled NIS 336 million, 236% more than in the second quarter of 2017, but Ithaca posted a NIS 32 million net loss on this business, compared with a NIS 47 million profit in the corresponding quarter last year.

Revenue from this activity is projected to continue growing in the second half of the year; Delek Group reported early this week that Ithaca was acquiring its partners' 50% rights to licenses and facilities in the vicinity of the expanded Stella reservoir, which includes producing reservoirs Stella and Harrier and the Hurricane reservoir, development of which is scheduled to begin in the coming years. As part of the deal signed last week, Ithaca also gained sole ownership of the FPF-1 floating platform used for production and drilling in the reservoirs.

As a result of $190 million deal (to be financed from Ithaca's own resources), Ithaca will hold all of the rights in the vicinity of the expanded Stella reservoir, which is likely to increase its revenue from the reservoirs there and boost its reserves.

Gas product activity in Israel at the Tamar reservoir contributed NIS 355 million to Delek Group's revenue, 23% less than in the corresponding quarter last year (Delek Group reduced its holdings in the reservoir following the Tamar Petroleum offering in July 2017), and added NIS 106 million to the group's net profit, 11% less than in the second quarter of 2017.

Revenue from fuel marketing in Israel through the group's chain of filling stations and convenience stores rose 30% in the second quarter, contributing NIS 27% to Delek Group's second quarter profit.

Published by Globes [online], Israel business news - - on August 30, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Leviathan gas field Photo: Noble Energy
Leviathan gas field Photo: Noble Energy
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