Delek Group Announces Consolidated Results for the Third Quarter of 2015

November 26, 2015 at 4:29 AM EST

Tel Aviv, November 26, 2015, Delek Group Ltd. (TASE:  DLEKG, US ADR: DGRLY) (hereinafter:  "Delek Group" or “The Group”) announced today its results for the three  months period ending September 30, 2015. The full financial statements are available  in English on Delek Group’s website at: www.delek-group.com.


Third Quarter of 2015 Highlights
     
  • The E&P sector contributed NIS 87 million to  the Group’s net income in the third quarter of 2015 versus NIS 38 million in  the same period last year;
  •  
  • The Tamar field reached  peak production of natural gas, selling a record 2.5 BCM in the third quarter  of 2015, compared with 2.2 BCM in the same period of last  year;
  •  
  • Towards final regulatory resolution, with the  approved Framework by the Israeli Government for increasing the amount of  natural gas produced from the Tamar natural gas reservoir and the rapid  development of the Leviathan, Karish and Tanin and other natural gas  reservoirs;
  •  
  • Delek Group is taking advantage of opportunities in  the international energy market: has acquired 19.9% of Ithaca Energy and continues  to examine further strategic investments in the E&P field;
  •  
  • Delek Group signed an agreement to sell its remaining  holdings in Republic Companies, Inc., representing another successful step  forward in the Groups’ execution of the sale of its non-core businesses;
  •  
  • Net  income, excluding a one-off impairment loss in the Company’s traded financial  portfolio, amounted to approximately to NIS 75 million in the third quarter of  2015, compared with NIS 150 million in the same period of last year;
  •  
  • Declared a dividend of NIS 80 million.

Group revenues for the third quarter of 2015 were approximately NIS  1.7 billion, compared to NIS 2.0 billion in the same period last year. The  decrease was primarily due to lower revenues from Delek Israel because of low  distillate prices, countered by an increase in revenues from the  E&P sector as a result of record production from the Tamar reservoir.

Operating profit in the third quarter of 2015 totaled NIS 341 million compared with NIS 240  million as reported in the same period last year, mainly due to increased  contribution from the E&P sector as well as the Fuel Operations segment in  Israel.

Net loss for third quarter of 2015 totaled NIS 261 million,  compared with a net profit of NIS 150 million in the third quarter of 2014. The primary contributing factor to the net  loss, despite a positive operating profit, was due to a P&L write-down in the  values of the Group's financial investments, accounted for as  available-for-sale financial assets, which includes the shareholdings of foreign  companies mainly operating in the energy industry. As of September 30, 2015,  the Group recognized a cumulative impairment on some of these investments  amounting to NIS 336 million. It is noted that as of November 25, the market  value of these investments reflected an appreciation of NIS 70 million from  these levels. It is noted that, until September 30, 2015, income of NIS 45  million had been recognized on these investments.

The positive contributing  factors to the net income were the increased contribution of the Oil and Gas Exploration, and Gas  Production Operations from sales of gas from the Tamar field which reached peak  production.

Cash balance at the Delek Group  correct as of September 30, 2015 stood at NIS 3.3 billion (excluding unutilized  credit lines). In October 2015, Delek Group completed a  successful expansion  of Series B31 Debentures, with raising an additional amount of NIS 722 million.

Commented Mr. Bartfeld, President and CEO of Delek Group; “Our third quarter results again demonstrate the  correct strategic decision we took as a Group to focus our operations on the exploration  and production of oil and gas, given the strong increase in our earnings from  this sector. The strategic investment we have made in Itacha Energy is a direct  continuation of our strategy, whereby our focus is centered on the Eastern  Mediterranean energy sector, along with the creation of a strong and stable arm  of operations in the international energy market. This is an important step which  expands our international operations and diversifies our E&P activities.  Ithaca Energy is synergistic to Delek Group’s existing operations, is  complementary to our activity in this sector and we believe will contribute to the  continued growth at Delek Group.”

Mr. Bartfeld continued, “We are  continuing with our strategy to identify opportunities in the international energy  sector for further investments. Now, with the approval of the Framework by the National  Security Cabinet and the Israeli Government, in the near future we intend to  focus on accelerating the development of Leviathan and the expansion of Tamar  project, based on the timetable and conditions of the Framework. In addition,  we look forward to promoting the development of Aphrodite in Cyprus, along with  our new strategic partner in the reservoir, BG International.”

 

Main Business Highlights

Contribution  of Principal Operations to Net Income (NIS millions)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

FY
        2014

Q1
        2014

Q2
        2014

Q3
        2014

9M
        2014

Q1
        2015

Q2
        2015

Q3
        2015

9M
        2015

 

93

38

(13)

38

63

67

60

87

214

Oil and Gas Exploration, and    Gas Production Operations

4

40

4

(5)

39

15

40

21

76

Fuel Operations in Israel

107

30

21

44

95

78

40

10

128

Automotive Operations2

204

108

12

77

197

160

140

118

418

Contribution    to continuing operations before sold-off operations, discontinued operations    and capital and other gains

255

94

22

71

187

(24)

41

9

26

Insurance and finance    operations in Israel (pending sale)

35

(23)

(4)

(8)

(35)

-

-

-

-

Sold-off operations

-

-

-

-

-

-

-

(336)

(336)

Impairment of marketable    securities portfolio1

(1,259)

(374)

(630)

10

(994)

74

(159)

(52)

(137)

Capital Losses & Others

(765)

(195)

(600)

150

(645)

210

22

(261)

(29)

Net Income Attributed    Group’s Shareholders

 

 

 

 

 

 

 

 

 

1As of  September 30, 2015, the Group recognized the cumulative impairment on some of  these investments in profit or loss, in light of their significant and/or  continued impairment. The total loss recognized in profit or loss in the third  quarter of 2015 amounted to NIS 336 million. It is noted that, until September  30, 2015, income of NIS 45 million had been recognized on these investments.  The total economic loss, as of September 30, 2015, amounted to NIS 291 million.  Immediately prior to the financial statements' approval, the market value of  these investments reflected an appreciation of NIS 70 million, as compared to  their market value on September 30, 2015.
2Includes recognized  gains on the sale of Mobileye shares; see Section 6 below and Note 3 to the  financial statements.
Please  review the full report available on the Group's website www.delek-group.com to view the notes for  each of the items above.

Energy  & Infrastructure

Oil and Gas Exploration &  Production Sector Highlights

Tamar  Project, 10.6  TCF natural gas discoveries (Tamar and Tamar SW). Tamar produced 2.5 BCM of natural gas in the third  quarter of 2015, compared with 2.2 BCM in the same period last year. This is an increase  of 13.6% compared to the same quarter last year and a 47% increase from Tamar’s  first year Q3 production in 2013. Yet, this high level of sales did not meet  the full demand in the Israeli market, which filled the gap from imported Liquefied  Natural Gas and fossil fuels.

Tamar sold 117,000  barrels of condensate in the third quarter of 2015, compared with 104,000  barrels in the previous period.

Aphrodite, a 4.5 TCF (Contingent & Prospective) natural gas discovery located  in the Block 12 license, off the coast of Cyprus. On November 24, 2015, Noble Energy  Inc. sold 35% of the rights in Block 12 (half of the rights that Noble itself owns)  to BG International, who will become a strategic partner in Block 12. Apart  from Noble, BG will join the other partners in Block 12: the Group’s gas  subsidiaries Delek Drilling - Limited Partnership and Avner Oil Exploration -  Limited Partnership that each hold 15% of the rights.

Leviathan, a 22 TCF natural gas  discovery.On November 24, 2015, a letter of intent was signed  between the Leviathan Partners and Dolphinus Holdings Limited, confirming their  intention to negotiate an agreement for the supply of 4 BCM per year for a  period of 10-15 years of natural gas from Leviathan using an existing gas  pipeline operated by East Mediterranean Gas Limited ("EMG").  This represents an important milestone  agreement, paving the way for the further international contracts and collaboration  in the Eastern-Mediterranean region.

With regard to developments on the regulatory front: During the third quarter, the Ministerial Committee for National  Security, the Government and the Knesset (Israeli Parliament) approved an Framework  calling for increasing natural gas production at the Tamar field and accelerated  development of the Leviathan, Karish, Tanin and other natural gas fields. Furthermore,  on November 5, 2015, it was announced that the Prime Minister, acting as the  Minister of Economy, had announced his intention to use powers granted under Section  52 of the Antitrust Law, to sidestep the Antitrust Authority.

Karish, a 1.8 TCF (Contingent  & Prospective), and Tanin, a 1.2 TCF (Contingent & Prospective)  natural gas discoveries off the coast of Israel. In November 2015, the  Group’s gas subsidiaries signed an agreement with Noble Energy, whereby Noble  would grant the Group’s partnerships the right to sell Noble's rights in the  366/Alon C and 364/Alon A licenses (the Karish and Tanin licenses) for US$ 67  million. This agreement is contingent on the final and unconditional approval  of the gas Framework, and on approval by a meeting of the unit-holders in the partnerships.

Ithaca  Energy Inc. (19.9% owned by Delek Group). In October 2015, the  Group purchased 19.9% of the share capital of Ithaca Energy for US$ 66 million.  Delek Group will be entitled to two places on its Ithaca’s Board of Directors  as well as representation on the various Board committees.

Ithaca  is an independent oil and gas operator focused on North Sea production,  appraisal and development activities, holding both producing assets and assets  under development. Ithaca is a partner in 11 producing oil and gas fields, in  three of which it acts as operator. Ithaca's shares are traded on the Toronto  Stock Exchange (TSX) and on the AIM exchange in London.

In the  Group’s financial statement, Itacha will be presented based on equity method  commencing in the fourth quarter.

Gas Production  Summary.Net income from the sector for the third quarter of 2015  was NIS 87 million, an increase compared to a net income of NIS 38 million in  the same period in 2014. This year-over-year increase was due, among other  things, to a higher level of revenues from natural gas sales to customers in  the Tamar Project and lower financing expenses.
 
  Downstream Energy Sector  Highlights

Delek – the Israel Fuel Company Ltd. (fully  held by Delek Group); Contribution to net income in the third quarter of 2015  amounted to NIS 21 million compared with a net loss of NIS 5 million in the  same period last year. The increase was due to greater fuel and convenience  store sales, and sales growth in the containerization and distribution segment.  The increase was partially offset by lower margins on several products in the  direct marketing segment.

Insurance  and Financial Services

With regard to the Group’s  binding agreement with Fosun International Limited for the sale of all the  Company's holdings in Phoenix Holdings Ltd (52.3%), the parties are continuing the  process of the sale.

On September 29, 2015, in  a positive development which occurred earlier than expected, the Group signed  an agreement with AmTrust Financial Services Inc. to sell its remaining 66% holdings  in Republic for US$ 140 million. Simultaneous to signing the sales agreement,  AmTrust also signed share purchase agreements with Republic's other  shareholders, so that following these transactions AmTrust will hold 100% of  Republic's share capital.

 

Dividend Distribution

On November 26, 2015,  the Board of Directors of Delek Group declared a cash dividend distribution for  the third quarter of 2015 in the amount of approximately NIS 80 million  (approximately NIS 6.6758 per share) to the shareholders on record as of December  07, 2015 and the dividend will be paid on December 23, 2015.

 

Conference Call Details

The Company will be hosting a conference  call in English on Monday, November 30, 2015.  Management will also be available to answer investor questions.
  To participate, please call one of  the following teleconferencing numbers.   Please begin placing your calls at least 5 minutes before the conference  call commences. If you are unable to connect using the toll-free numbers,  please try the international dial-in number.
  US Dial-in Number: 1-888-668-9141
  UK Dial-in Number: 0-800-917-5108
  ISRAEL Dial-in Number: 03-9180685
  INTERNATIONAL  Dial-in Number:  +972-3-9180685
  At:
  9:30am Eastern Time, 2:30pm UK Time, 4:30pm Israel Time

On the call, Mr. Gabi Last,  Chairman of the Board of Directors, Mr. Asi Bartfeld, CEO, Mr. Barak Mashraki,  CFO, and Mrs. Leora Pratt Levin, the Chief Legal Counsel will review and  discuss the results, and will be available to answer your questions.

 

About  The Delek Group

The Delek Group, Israel's dominant  integrated energy company, is the pioneering leader of the natural gas  exploration and production activities that are transforming the Eastern  Mediterranean's Levant Basin into one of the energy industry's most promising emerging  regions. Having discovered Tamar and Leviathan, two of the world's largest  natural gas finds since 2000, Delek and its partners are now developing a  balanced, world-class portfolio of exploration, development and production  assets with total gross natural gas resources discovered since 2009 of  approximately 40 TCF.

In addition, Delek Group has a number of  assets in downstream energy, water desalination, and in the finance sector.

For more information on Delek Group please  visit www.delek-group.com or Email:investor@delek-group.com

 

Contact

           

International    Investor Relations
      Dina    Vince
      Tel:    +972 9 863 8443
      Email:dinav@delek-group.com