Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, is expanding its activity in the Gulf of Mexico. The Israeli energy group has signed an agreement to acquire 22.45% of the Caesar Tonga oil field in the Gulf of Mexico from a subsidiary of Royal Dutch Shell plc for $965 million.
Delek Group points out that the closing payment will be about $785 million, after adjustment of the cumulative net cash flow at the asset from the effective date of the transaction, January 1, 2019, until completion date by the end of the third quarter of 2019. Completion of the transaction is subject to, among other things, the right of first refusal possessed by the field's other co-owners.
Delek Group says that the field, 300 kilometers south of Louisiana, is one of the ten largest deep-water resources in the US Gulf of Mexico, with a production horizon spanning tens of years. Delek Group will co-own the asset with Anadarko Petroleum (33.75%, and the field's operator); Equinor (23.5%); and Chevron (20.25%). As part of the transaction, Delek Group will sign a long-term off-take agreement with a Shell affiliate (Shell Trading (US) Company) to purchase oil produced from the field for a period of 30 years at either market prices or prices matched to third party offers.
Production from the field commenced in 2012 and the current production rate stands at 71,000 barrels per day of oil equivalent (total gross), with 90% of the output being oil. The expected life of the field is 30 more years, and Delek Group's interest reflects 78 million barrels of oil equivalent (2P) reserves assuming no change in the current production rate. The Group's share of the asset generates annual EBITDA of approximately $230 million.
The transaction will be financed by reserve based loan (RBL) facilities from a consortium of international banks granted to the special purpose entity that will buy the asset, and through debt which will be taken out by the purchaser (a wholly-owned foreign subsidiary of Delek Group).
Delek Group president and CEO Asaf Bartfeld said, "The transaction for acquisition of the rights in the Caesar Tonga field is a further important stage in implementing Delek Group's strategy to expand and establish our operations on the international stage. This is a strategic opportunity, which provides the Group access to a producing oil asset with significant proven reserves, with a strong cash flow and partnership with leading players in the global energy market.
"This activity, alongside the oil and gas exploration activity we are carrying out in the North Sea and the Gulf of Mexico, gives added emphasis to the Group's position in the international energy market."
Published by Globes, Israel business news - en.globes.co.il - on April 11, 2019
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