Stronger Delek financials still carry going concern warning

Idan Wallace

The energy company earned NIS 279 million in the first quarter, which compares with a net loss of NIS 2.8 billion in the corresponding quarter.

The going concern qualification, which has been attached to Delek Group Ltd. (TASE: DLEKG) financial results since 2020, remains despite the company's strong first quarter results. Even changing auditors from EY Israel to Deloitte has not helped.

Delek Group, controlled by Yitzhak Tshuva, ended the first quarter of 2021 with a net profit of NIS 279 million compared with a net loss of NIS 2.8 billion in the corresponding quarter of 2020. Revenue in the first quarter of 2021 was NIS 1.91 billion, up from NIS 1.88 billion in the first quarter of 2020.

Delek Group's main activities are energy exploration and production in the Eastern Mediterranean (Israel and Cyprus) and in the North Sea. The former activity is through its Delek Drilling LP (TASE: DEDR.L) unit in which it holds a 55% stake and the latter is through its 100% stake in Ithaca Energy. In the first quarter of 2021, Delek Drilling yielded Delek a net profit of NIS 166 million and Ithaca's net profit amounted to NIS 141 million.

Delek Group CEO Idan Wallace said, "The first quarter results indicate strong performance by our core business activities in the energy sector in Israel and in the North Sea. The significant increase in the volume of production and sales from the Leviathan reservoir, as well as the contribution of the rise in the energy prices and the continued strengthening of the financial position of Ithaca, have allowed Delek Group to present a net profit of NIS 279 million in the quarter, compared with a loss of close to NIS 2.8 billion recorded in the same quarter last year.

He added, "At the same time, we are continuing to work to strengthen our liquidity and equity. In this context, the bondholders have approved the amendment to the updated Deed of Trust, which enables postponement of the date of review of the rating covenant by a number of instalments, in exchange for a series of additional measures we will implement in order to continue improving the Group's financial position. We are continuing to promote additional significant moves while taking advantage of the financial flexibility we have been able to obtain following the steps we have taken over the last year, such that our assets, which include, among others, Ithaca, the unencumbered participation units in Delek Drilling, the balance of the holdings in Delek Israel, the overriding royalties from Leviathan, the seller's loan to the Phoenix buyers, and our real estate properties, will enable us to generate the cash flows required by the Group."

Published by Globes, Israel business news - en.globes.co.il - on May 31, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Idan Wallace
Idan Wallace
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