|Delek Group Announces Consolidated Full Year Results 2016|
Tel Aviv, March 30, 2017, Delek Group Ltd. (TASE: DLEKG, US ADR: DGRLY) (hereinafter: "Delek Group" or “The Group”) announced today its results for the fourth quarter and full year period ended December 31, 2016. The full financial statements are available in English on Delek Group’s website at: www.delek-Group.com
Group revenues in 2016 totaled NIS 5.8 billion compared with NIS 6.3 billion in 2015, mainly due to a decrease in distillate prices in 2016 compared to 2015 affecting the fuel marketing business.
Group operating profit in 2016 totaled NIS 1.5 billion, compared with NIS 1.0 billion in 2015. The increase was due to an increased operating profit contribution from the E&P sector.
Net income in 2016 totaled a record NIS 625 million compared with NIS 25 million in 2015. The main contributing factor to the improvement was the increased contribution of the E&P segment as well as a profit recorded from the sale of the Karish and Tanin leases, and lower finance expenses and others.
Balance sheet continued to strengthen and current cash balance as of March 29, 2017 was NIS 3.5 billion, including unutilized credit lines.
On February 22, 2017, Delek Group completed a successful debentures issuance through an expansion of Series B31, which was oversubscribed. The issuance contributed an additional NIS 1.0 billion in cash to the balance sheet.
The Company’s Board of Directors approved a dividend distribution of NIS 200 million for the fourth quarter of 2016, contributing to a total of NIS 560 million distributed in 2016, representing a dividend yield of 5.4%.
Mr. Asaf Bartfeld, President and CEO of Delek Group, commented “Delek Group has had a very good year and excellent fourth quarter. Over the past year, we successfully met most of the goals we had set ourselves for 2016; first and foremost, we reached a final investment decision to develop the Leviathan field. We also further implemented our strategy towards focusing the Group’s activity in the energy arena, particularly expanding our international operations."
Continued Mr. Bartfeld, “All this has been made possible due our exceptional financial strength and the high level of confidence placed in us by the investment community. Looking forward, 2017 will be marked by furthering the Group's international presence, by executing on our strategy to focus on the energy sector, with a goal of becoming a key player in global energy markets.”
Main Business Highlights
Contribution of Principal Operations to Net Income* (NIS millions)
(1)After selling the rights of the Tanin and Karish gas leases in December 2016, the Group recognized gains of NIS 253 million (see also Note 12G to the financial statements).
Oil and Gas Exploration & Production
East Mediterranean E&P
Tamar Project, 11 TCF natural gas discoveries (Tamar and Tamar SW). The trend of increasing production continued, reaching 9.4 BCM of natural gas in 2016 (~0.9 Bcf/d), an increase of 13% compared with 8.3 BCM in 2015 (~0.8 Bcf/d). At various times during 2016, Tamar reached peak production of over ~1.0 Bcf/d. In addition, Tamar sold 448 thousand barrels of condensate in 2016, compared with 395 thousand barrels in 2015. The increase in demand was due to the gradual replacement of coal by natural gas as the main energy source for domestic electricity production. According to the Israel Electric Corporation (IEC), 49.9% of domestic electricity production in 2016 was from natural gas and Independent Power Plants using natural gas contributed 25% of total domestic production, an increase from 21% in 2015.
An updated Discounted Cash Flow of the Tamar Project has been published in the Company’s full year 2016 report.
The wells will be drilled as follows: initially, the Leviathan-7 well will be drilled to a depth of 2,900 meters below sea level; subsequently, the Leviathan-5 well will be drilled to a final depth of 5,200 meters below sea level; and at the third stage, the Leviathan-7 well will be drilled further to 5,100 meters below sea level.
Ithaca Energy, Inc. (19.7% owned by Delek Group). Delek Group is currently Ithaca's largest shareholder with 19.7% of the currently issued and outstanding common shares of Ithaca. As part of the Company's strategy to expand its international energy operations, on March 14, 2017, the Company made an offer to acquire all of the common shares of Ithaca Energy not currently owned by Delek Group or any of its affiliates for CAD 1.95 per share. The price reflects a premium of 12% on the closing price of Ithaca shares on February 3. The offer will close on April 20, 2017, unless extended or withdrawn. Ithaca's Board of Directors unanimously recommended that the Ithaca shareholders accept the Offer.
Completion of the offer is subject, among other things, to acceptance by more than 50% of the shares offered for purchase, that is, the remaining 40% of Ithaca's share capital, as well as various additional conditions.
On March 24, 2017, Ithaca bondholder’s owning USD 300 million in bonds, approved the waiver of the immediate repayment clause as a result of a change in control at Ithaca. In addition, Ithaca received a waiver for its reserve based lending (RBL).
Faroe Petroleum PLC (13.18% owned by Delek Group). As part of the Company's strategy to expand its international energy operations, on December 22, 2016 the Company acquired 13.18% of the share capital of Faroe Petroleum from Dana Petroleum, totalling GBP 42.77 million (approx. NIS 200 million). Faroe is an oil and natural gas exploration and production company operating in the North Sea, and is traded on the AIM stock exchange in London under the symbol FPM.
Ratio Petroleum Energy Limited Partnership (17.5% of the participation units owned by Delek Group): The units began trading on the Tel Aviv Stock Exchange in January 2017. Ratio operates in the exploration, development and production of hydrocarbons with rights in Guyana, Matla, Ireland and the Philippines.
Delek – the Israel Fuel Company Ltd. (fully held by Delek Group); net income in 2016 amounted to NIS 21 million compared with a net income of NIS 87 million in 2015. This decrease was mainly due to capital losses as opposed to capital gains in the prior year, as well as a one-time impairment of a gas compression facility.
On August 21, 2016, the Group entered into a binding agreement with Yango Investment PTE. Ltd. for the sale of all the Company's holdings (52.3%) in Phoenix Holdings Ltd. The consideration is NIS 1.9 billion and carries an annual interest rate of 4.75% from January 1, 2017, until the closing date. The parties are continuing the process of obtaining all the necessary regulatory approvals towards completion of the transaction. On February 16, 2017, the parties signed an amendment to the agreement, extending the period for meeting the stipulated pre-conditions until March 31, 2017, so that if by that date the conditions for the transaction had not been met, either party to the agreement may notify the other of termination of the agreement.
On March 29, 2017, the Board of Directors of Delek Group declared a cash dividend distribution for the fourth quarter of 2016 in the amount of approximately NIS 200 million (or NIS 16.6895 per share) to shareholders. The ex-date is on April 20, 2017 and the dividend will be paid on May 4, 2017.
The total declared dividend for 2016 of the Group amounted to NIS 560 million.
Conference Call Details
The Company will be hosting a conference call in English on Thursday, March 30, 2017 at 3.30 PM (Israel Time), 8:30 AM (ET), 1:30 PM (UK). To participate in the conference call, please dial:
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.
Delek Group Income Statement (NIS Millions)