Delek writes-off $35m on North Sea activities

Yitzhak Tshuva  photo: Gil Yohanan
Yitzhak Tshuva photo: Gil Yohanan

The group reported 18% growth to NIS 6.8 billion in revenue in 2017 but Delek Group's North Sea oil production business is faltering.

Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, recorded an NIS 873 million capital gain on the sale of 9.25% of the shares in the Tamar natural gas reservoir. Net profit soared 94% to NIS 1.2 billion in 2017.

The group's revenue grew 18% to NIS 6.8 billion, and its operating profit was up 70% to NIS 2.5 billion.

Besides its holdings in Tamar though the Delek Drilling LP (TASE: DEDR.L) limited partnership, the Leviathan reservoir is currently in the development stage, with production slated to start in late 2019. Delek Group has other holdings in filling stations and convenience stores through Delek Israel, oil and gas exploration in the north Sea (Ithaca Energy), and control of The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), which it is currently in the process of selling.

Delek Group's North Sea oil production business (the Stella reservoir) is faltering. Despite a rise in oil production from 9,300 barrels a day in 2016 to 13,900 barrels a day in 2017, Ithaca had to write off $35 million for a decline in production guidance in the Stella reservoir.

Ithaca's revenue jumped 68% to $242 million in 2017 (Delek acquired full control of Ithaca in the second quarter of 2017), but posted a $36 million loss on this business.

Ithaca posted $93 million in revenue and an $11 gross profit in the fourth quarter of 2017, but $16 million in financing expenses, combined with write-off in this quarter, cost the company a $63 million net loss.

Fuel activity in Israel through Delek Israel , which operates a chain of filling stations and convenience stores, generated a NIS 100 million profit for the group last year, almost five time the profit in 2016, because Delek Israel had NIS 77 million in one-time expenses in 2016, while its 2017 fuel sales were up 15% to NIS 4.1 billion, sales by its convenience stores rose 3%, and general and management expenses and financing expenses declined.

Delek Israel's revenue rose 14% to NIS 1.1 billion in the fourth quarter, and its operating profit was NIS 43 million, compared with a NIS 21 million operating loss in the corresponding quarter in 2016, when it had NIS 49 million in one-time expenses. Delek Israel's fourth quarter net profit totaled NIS 20 million, compared with a NIS 27 million loss in the corresponding quarter in the preceding year.

Delek Group CEO Asi Bartfeld said today, "2017 was an excellent business year for Delek Group, ending in important announcements that we published in recent days about the signing of a historic contract for exporting $15 billion of gas from Israel to Egypt over a 10-year period and completion of the suspending conditions for the export agreement with Jordan. The company continued development of its international business in the North Sea and the Gulf of Mexico aimed at achieving the target it set for itself of becoming an international energy company."

Bartfeld added, "Among other things, 2018 will feature the group's continued focus on energy and completion of the offer to purchase we filed for Delek Energy Systems Ltd. (TASE:DEOL) in order to streamline the group's holding structure in the sector, completion of the process for the sale of the group's holdings in Phoenix Holdings, accelerated development of the Leviathan reservoir towards the beginning of natural gas production from it in 2019, continued progress in negotiations for exporting gas from the Tamar, Leviathan, and Aphrodite, and further consolidation of the group's international energy business, based on the group's existing investments in the North Sea and Gulf of Mexico and sales of additional assets that are not part of the group's core activity."

Yitzhak Tshuva  photo: Gil Yohanan
Yitzhak Tshuva photo: Gil Yohanan
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