Ithaca Energy agreement (additional regulatory disclosure)

August 26, 2018 at 11:27 AM IDT

Tel Aviv, August 26, 2018. Delek Group (TASE: DLEKG, US ADR: DGRLY) (“the Company”) announces that further to what was stated in sections 1.8.5 and 1.8.26(b) of the Company's Periodic Report to December 31, 2017 that was published on March 28, 2018 (ref. no. 2018-01-031177) (“the Periodic Report”) and the Company’s Immediate Report dated July 17, 2018 concerning examining the possibilities to purchase oil assets in the North Sea through the Company’s subsidiary, Ithaca Energy Inc. (“Ithaca”) (ref. no. 2018-01-064800), on August 23, 2018 Ithaca entered into agreements for the purchase all the rights in the platforms and licenses detailed below of its partner in the Greater Stella Area project (“the Agreement” and “GSA”, respectively), so that after completion of the transaction Ithaca will hold all the rights in the floating production facility “FPF-1” in the GSA project and all the rights and licenses except for the Vorlich license ("the Additional Rights").

The Additional Rights will be purchased by Ithaca from its partners in the project: Dyas UK Limited (“Dyas”) and Petrofac Limited (“Petrofac”) (Dyas and Petrofac together will be called "the Partnership").

The Additional Rights include all the ownership rights of the Partnership in the floating production facility used as the production center of the GSA project, the FPF-1 (“the Floating Production Facility”) (see section 1.8.5(c)(5) of the Periodic Report), and the Partnership’s rights in the, Stella, Harrier and Hurricane licenses. Purchase of the licenses is intended to materially increase Ithaca’s share of the reserves and production of the GSA project, and to provide Ithaca with full long-term control and flexibility to develop the productive assets of the GSA project.

The date of record under the Agreement for purchase of the Additional Licenses is January 1, 2018 (“the Date of Record”), with the consideration being paid at the completion date being subject to adjustments that will reflect the revenues and results related to the assets from the Date of Record. Ithaca estimates expected completion of the transaction towards the end of 2018, subject to receipt of the required regulatory approvals and fulfillment of additional conditions stipulated in the Agreement, as usual in transactions of this sort.

In consideration for the Additional Rights Ithaca will pay USD 190 million, and has agreed to a new arrangement for the existing deferred payment by Ithaca to Petrofac of USD 140 million. Accordingly, Ithaca is expected to pay at the completion date of the transaction USD 130 million will be paid (after deduction of cash flows in the interim period of about USD 80 million), and in addition to deferred payments to Petrofac of USD 120 million, to be paid over the years 2020-2023.

In addition to the foregoing, as part of the transaction the rights of the Partnership in two additional, inactive licenses (Jacky and Athena) will be transferred to Ithaca, for which Ithaca is expected to bear their abandonment expenses (USD 18 million).

Ithaca intends to finance the purchase of the Additional Rights from its own resources, including an increase and extension of the reserves-based credit facility.

Warning concerning forward looking information - the Company’s and Ithaca’s estimates detailed above, including the possibility of completion of the transaction and the consideration to be paid at completion date, are forward looking information in its meaning in the Securities Law, 1968. These estimates are based on and dependent on, inter alia, on factors over which neither Ithaca nor the Company have control, and they may accordingly not come about in the manner described in this report.

 

Appendix A

Details about the Oil Asset

For a description of the GSA Project, in accordance with Chapter 2 of the Third Addendum to the Securities Regulations (Details of Prospectus and Prospectus Draft - Structure and Form), 1969, see section 1.8.5(C) of the Periodic Report, whose details are included here by way of reference.

Below are updates and changes to the Project description in the Periodic Report, on the assumption that transaction will be completed.

  1. Section 1.8.5(C)(1) of the Periodic Report - General details about the Oil Asset

Following completion of the transaction Ithaca will hold 100% of the FPF-1 Floating Production Facility and all the licenses of the Project, except for the Vorlich license, about which there has been no change at all.

  1. Section 1.8.5(C)(1) of the Periodic Report - General details about the Company’s Share in the Oil Asset

General information about the Company's share in the oil asset

Acquisition date of the lease for the acquired oil asset:

The Additional Rights were purchased by Ithaca between 2008 and 2018.

Description of the Company's holding in the oil asset:

Through the Company’s holdings in the shares of Ithaca.

Effective share of oil asset revenues attributable to equity holders of the Company:

Stella/ Harrier (p.011(1st))- 100%

Hurricane (p.1665 (25th)), Hurricane Extension (p.2190 (28th))- 100%

Austen (p.1823 (25th))[1]- 100%

Vorlich[2] (P363 (7th)) (Block 30/1c Lower)- 34%

Vorlich[3] (P363 (7th)) (Block 30/1c Lower)- 34%

Vorlich[4](P1588 (25th))- 34%

Total share of equity holders of the Company in the cumulative investment in the oil assets in the three years preceding June 30, 2018 (whether recognized as an expense or as an asset in the financial statements):

98,000[5]

[5] Over 90% of the cumulative investment in the GSA Project during the three years preceding June 30, 2018 was invested in development of the Stella production field. For details about the consideration to be paid for the Purchased Rights, see the Agreement in this report.

  1. Section 1.8.5(C)(6)(a) of the Periodic Report - Rate of actual participation in costs and revenues in the Stella/Harrier, Hurricane and Hurricane Extension licenses

Participation rate

%

Percentage rounded to 100%

Explanations

Effective share of oil asset to equity holders of the Company

100%

100%

See below.

Effective share of oil asset revenues attributable to equity holders of the Company

100%

100%

 See below.

Effective share of oil asset costs related to exploration, development or production attributable to equity holders of the Company

100%

100%

 See below.

  1. Section 1.8.5(C)(7)(a) of the Periodic Report - Note on the calculation of the rate actually attributable to equity holders of the Company in the revenues of the Hurricane and Hurricane Extension licenses

Item

%

 

Summary explanation how the royalties or payments are calculated

Annual forecast revenues for the oil asset

100%

 

Details of royalties or payment (derived from revenues after discovery) at level of oil asset:

The State

-

According to the law in the UK royalties are not paid to the British Government on revenues from the sale of oil and gas from the licenses that Ithaca holds.

Net revenues at oil asset level

100%

 

Share of oil asset net revenues attributable to equity holders of the Company

100%

 

Total, rate attributable to equity holders of the Company in actual revenues from the oil asset (before other payments at the Company level)

100%

 

Details of payments (derived from revenues after discovery) related to the oil asset at the Company level (the percentages below will be calculated according to the rates attributable to equity holders of the Company in the oil asset):

Participation rates of the equity holders of the Company in the payment of royalties to third parties

-

 

Effective share of oil asset revenues attributable to equity holders of the Company

100%

 
  1. Section 1.8.5(C)(8)(a) of the Periodic Report - Note on the calculation of the rate actually attributable to equity holders of the Company in the costs of the Hurricane and Hurricane Extension licenses

Item

%

 

Summary explanation how the royalties or payments are calculated

Theoretical costs of the oil asset (without said royalties)

100%

 

Details of payments (derived from the results) at the level of the oil asset:

The Operator

-

 

Total percentage of actual costs at the level of the oil asset:

100%

 

Participation rates of the equity holders of the Company in in the oil asset costs

100%

 

Total actual rate attributable to equity holders of the Company in costs from the oil asset (before other payments at the Company level)

100%

 

Details of payments (derived from the results) related to the oil asset and at the Company level (the percentages below will be calculated according to the rates attributable to equity holders of the Company in the oil asset):

Effective share of oil asset costs related to exploration, development or production attributable to equity holders of the Company

100%

 
  1. The Company intends to publish details of the resources attributable to the above oil asset, in accordance with Regulation 22 of the Securities Regulations (Details of Prospectus and Prospectus Draft - Structure and Form), 1969, within sixty days of the Agreement date.

This is a convenience translation of the original HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on August 26, 2018.

About The Delek Group

Delek Group is an independent E&P and the pioneering visionary behind the development of the East Med. With major finds in the Levant Basin, including the Leviathan (21.4 TCF) and Tamar (11.2 TCF) reservoirs and others, Delek is leading the region’s development into a major natural gas export hub. In addition, Delek has embarked on an international expansion with a focus on high-potential opportunities in the North Sea and North America. Delek Group is one of Israel’s largest and most prominent companies with a consistent track record of growth. Its shares are traded on the Tel Aviv Stock Exchange (TASE:DLEKG) and are part of the TA 35 Index.

For more information on Delek Group please visit www.delek-group.com

Contact

Investors

Yonah Weisz

Head of Investor Relations

Delek Group Ltd.

Tel: +972 9 863 8443

investor@delek-group.com