Ratio Oil Exploration (1992) LP (TASE:RATI.L), which holds 15% of the Leviathan natural gas reservoir, has started preparing to raise the capital required for funding its share in developing the reservoir.
The partnership completed an offering Monday of 360,000 packages of 2,400 warrants on participation units at NIS 0.30 per unit. Demand for the offering was high, with requests for 780,000 packages.
The minimum price for a package was NIS 24, but due to the demand the price jumped to NIS 41 per package, lower than the price according to the Black-Scholes model. Past experience shows that prices of options on units in the Leviathan partnerships are higher than the Black-Scholes model price. The model pricies the Ratio package at NIS 48 - promising investors an impressive 17% profit on the offering price.
The packages sold on Monday by the company comprise 1,200 options exercisable in the next 50 days at a strike price of NIS 0.30 per option and 1,200 options exercisable for six months at a strike price of NIS 0.30.
The Black-Scholes model suggests the price of a short option is NIS 0.01 and price of the long option is NIS 0.03-0.04.
Assuming all options are exercised - if the price of a Ratio participation unit passes the NIS 0.30 threshold - the partnership will receive NIS 273.6 million (or more than $68 million).
As previously mentioned, Ratio raised the funds to help pay for its part in the development of the Leviathan field. Estimates place the development cost at $5-6 billion - Ratio is expected to provide $750-900 million.
A majority of the funding will be provided by the banks with senior debt that will be offered only after the company signs distribution deals with key clients in Israel and abroad. Experts believe the banks will provide secured loans covering 70%-80% of Ratio's part of the development costs after it signs with Israeli clients and the Jordanian electric company.
If Ratio receives $600 million from the banks, it will still need to finance another $300 million. Assuming all its options are exercised, it will be able to provide around $100 million from its own cash, while market sources believe it will raise the rest through additional debt offerings.
The offering was led by Leader Capital Markets.
Published by Globes [online], Israel business news - www.globes-online.com - on June 7, 2016
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