Petroleum Commissioner Yossi Wirtzburger notified the Givot Olam Oil Exploration LP (TASE:GIVO.L) partnership late last week that he was canceling its lease in Rosh HaAyin. The necessary majority for recruiting a new partner in the lease was not obtained in a vote by the holders of participation units in Givot Olam last Wednesday. The vote was on a proposal to recruit a new investor to purchase 40% of the lease for $40 million. Under the Petroleum Law, the partnership can now appeal to the Minister of National Infrastructure, Energy, and Water Resources, in which case the lease will not be canceled before a ruling on the appeal is issued.
Last week's meeting by the holders of participation units was held following the Petroleum Commissioner's cancelation of the Rosh HaAyin lease due to Givot Olam's inability to proceed with drilling and development of the Meged oil field.
According to information obtained by "Globes," only a 52% majority at the meeting favored bringing in a new investor, short of the required 75% majority.
Two days before the fateful meeting, Shapir Engineering & Industry Ltd. (TASE:SPEN) and Navitas Petroleum, controlled by Gideon Tadmor, announced the signing of a memorandum of understanding under which Navitas would become the operator of the project and acquire up to 50% of the direct holdings in the oil asset. By bringing Navitas into the project, Givot Olam hoped to obtain a three-month extension from the petroleum Commissioner for obtaining the required approvals proving the partnership's ability to finance and develop the project. After 14 years in which only one drilling was carried out in the project, however, the Ministry of National Infrastructure, Energy, and Water Resources is apparently finding it difficult to believe in the partnership's ability to carry out the project and the petroleum commissioner canceled the holding one day after the meeting of participation unit holders.
Shapir Engineering, which operates in infrastructure and construction, began oil exploration activity nearly a year ago when it acquired 10% of the shares in the general partner in the Givot Olam partnership for $1.3 million and then injected $2 million into the general partner at a value of $15 million, giving it 22% of the shares in the general partner. Shapir Engineering has invested a total of $3.9 million to date in the Givot Olam general partner ($3.3 million in acquiring shares and $600,000 as a loan) and has an option to invest more through an allocation in the general partner at a company value of $25 million, which would give Shapir Engineering 50% of the shares in the general partner.
The oil potential in the Meged field is estimated in the hundreds of millions of barrels, but Givot Olam, which held drillings there in recent years (up until April 2017), managed to produce only relatively small quantities from it. Givot Olam began producing oil from the Meged 5 field in 2011 and had produced just over one million barrels by the end of 2016, most of which were sold for $84 million. At the same time, for most this time, the partnership suffered losses, among other things because of production malfunctions and investment in development of Meged 6. Eventually, the partnership ran out of money and discontinued its activity.
Published by Globes [online], Israel business news - www.globes-online.com - on June 25, 2018
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