Infrastructure and construction company Shapir Engineering and Industry (TASE: SPEN) is changing its position in the Givot Olam partnership's oil and gas exploration. Givot Olam holds drilling licenses for the Meged oil field next to Rosh HaAyin. Just over a year after entering the partnership that manages Givot Olam's oil and gas exploration activity, Shapir Engineering is changing its strategy. Instead of investing in management of the activity through the general partner of Givot Olam, it now wants to join a Canadian company in investing in the operation of the partnership's Meged drilling following a long period of stagnation in drilling activity in the oil field, a development that will bring new life to it.
Shapir Engineering, controlled by the four Shapira brothers, today notified the Ben David family, the controlling shareholder in Givot Olam's general partner, that it had decided to exercise the put option it was granted when it entered the general partner, to sell its 22% stake to the Ben David family for nearly $3.5 million. Shapir Engineering is also demanding that the Ben David family repay a loan of just over $2 million granted to the general partner after Shapir Engineering joined it in August 2017.
At the same time, Shapir Engineering signed an agreement to obtain an option to join Canadian fund Albert Green Ventures with a $50 million investment for 40% of the rights in the Givot Olam limited partnership. The other 60% of the rights will remain in the hands of the holders of the partnership's participation units. The partmership's activity focuses on development of the Meged oil field. Commercial quantities of oil were previously produced from the Meged field, located east of Elad.
Ministry of National Infrastructure, Energy and Water Resources canceled the rights
Activity in Meged has been suspended for an extended period, after tens of millions of dollars were invested in it. After the partnership accumulated substantial losses, due among other things to a production malfunction, and became unable to continue the site's development, the Ministry of National Infrastructure, Energy and Water Resources last year canceled the rights it had granted to Givot Olam to operate the field.
The decline in Givot Olam's financial situation is also reflected in the value of its participation units. After the price of a unit neared NIS 0.01, the TASE deleted it from its main list in late 2014. The partnership's current market cap is NIS 100 million.
If the Canadian fund's investment goes through and Shapir exercises its right to join it, the two companies will invest jointly in renewed drilling at Meged, subject to approval from the Ministry of National Infrastructure, Energy and Water Resources for restarting activity at the field. Owners of the participation units and the Givot Olam board of directors already approved the Canadian fund's proposed investment in September, as far as is known six months after a proposal by Shapir Engineering to the partnership to add a US investor on different terms was not accepted.
Givot Olam has already appealed against the cancelation of its holding in the field by the Antitrust Authority director general. If the appeal is upheld, Shapir Engineering's option to enter an investment partnership can be exercised up to two weeks after approval is obtained from the Ministry of National Infrastructure, Energy and Water.
Published by Globes, Israel business news - en.globes.co.il - on November 1, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018