Ahead of next month's planned bond issue by Tamar Petroleum for the purpose of completing the deal for the acquisition of 7.5% of the rights in the Tamar natural gas reservoir from Nobel Energy, the partnerships in Tamar today published a revised report on the reservoir, including its projected cash flow.
The report, prepared by the NSAI company, is based on an analysis of the geological and engineering information from the various drillings and the up-to-date production data. According to the report, there is no change in the volume of reserves in the reservoir, which amount to 313 BCM of natural gas and 14 million barrels of condensates (a byproduct of gas production that can be used for various energy needs).
The partnerships are now saying that in July 2021, when Israel Electric Corporation (IEC) (TASE: ELEC.B22) can adjust the price of gas for the first time under the agreement signed by the parties (IEC is currently paying $6 per BTU, compared with $2.80 per BTU in the US and $4-5 per BTU in contracts signed by private electricity producers in Israel), the price will be downwardly revised by 12.5%.
The Tamar partners further said that according to the instructions and estimates used to calculate the expected cash flow from the reservoir, the reservoir is worth $11.7 billion at a 7.5% discounting rate.
Two of the main holders of rights in Tamar, Nobel Energy and Tamar Petroleum, last week signed an agreement under which Nobel Energy will sell 7.5% of the rights in the reservoir to Tamar Petroleum for $800 million. Tamar Petroleum will pay Nobel Energy $560 million in cash, and the rest through an allocation of shares constituting 43.5% of Tamar Petroleum's share capital, with a value of $240 million.
After the deal is completed, Tamar Petroleum will hold a 16.75% stake in the Tamar reservoir, while Noble Energy's holding will fall to 25%. The Delek Drilling Limited Partnership (TASE: DEDR.L), controlled by Delek Group Ltd. (TASE: DLEKG), will retain its 22% share of the reservoir, while Isramco Negev 2 LP (TASE: ISRA.L) will become the largest holder of rights in Tamar with a 28.7% holding. Other shares in Tamar are held by Dor Gas Exploration (4%) and Everest Infrastructure (3.5%).
In order to finance the acquisition, subject to approval of the shareholders in Tamar Petroleum (a shareholders' meeting has been summoned for March 6), Tamar Petroleum will issue another bond series (Series B) amounting to $560 million, apparently in March, with a duration and yield similar to that of the Series A bonds issued by the company in the summer of 2017 (dollar-linked bonds with a 5.9-year duration and a current annual yield of 5%).
Tamar Petroleum will also make a private share allocation of 43.5% of its capital, which will of course substantially dilute the existing shareholders. Delek Group, which currently owns 40% of the shares in Tamar Petroleum through Delek Drilling, will fall to a 22.6% holding following the deal, while the other shareholders will also be diluted, including investment institutions Menorah Mivtachim Holdings Ltd. (TASE: MORA), Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), and Amitim.
Published by Globes [online], Israel Business News - www.globes-online.com - on February 7, 2018
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