Delek Group September 2016

Transcription

1 Delek Group September 2016 Leading Israeli Oil & Gas E&P Group 1

2 Disclaimer This presentation has been prepared by Delek Group Ltd ( Delek or the Group ) and is provided to you solely for your information and is not to be copied or distributed to any other person. This presentation does not purport to be allinclusive or to contain all of the information that may be relevant in making any decision concerning an investment in the securities of the Delek Group or any company in the Group. No representation or warranty, express or implied, is made by any person as to the accuracy or completeness of any of the information contained herein. In particular, no representation or warranty is given as to the achievement or reasonableness of any forecasts about the future prospects of the Delek Group or any company in the Group. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities, and neither this presentation nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. 2 2

3 Leading the East Med. Energy Revolution Top Tel Aviv listed Company $2.4bn market cap, part of the TA 25 index Long term track record of growth and attractive dividend policy Issued NIS 2.4 billion in dividends in last 5 years Transforming Levant Basin into a Natural Gas Export Hub World-class portfolio of E&P assets with 40 TCF of natural gas in 8 consecutive discoveries Significant Potential from Unexplored Acreage Extensive 3D Seismic Surveying in Israel & Cyprus to Capture Additional Gas & Oil Resources 3 3

4 Delek Group s Strategy at Work Divestment Out of Non-Core Assets Reduce Group s Leverage Focus on Upstream 4 4

5 Delek Group s Divestments Total proceeds of $1.3 billion since the beginning of 2014 Assets in Sale Process Holding of 50% Holding of 52% Delek Group and its partner, Israel Chemicals, in joint sale process Signed agreement with Yango Investment for NIS 1.9 billion (to be paid in full in cash at the closing) Signed agreement to sell IPP Ashkelon for NIS 200 million 5 5

6 Becoming an E&P Pure Play 6 6

7 8 Consecutive Natural Gas Discoveries; 40 TCF 2011 Aphrodite 4.6 TCF Cyprus Block Leviathan 21.9 TCF 2011 Dolphin 0.1TCF 2010 Tanin 1.2 TCF 2013 Karish 1.8 TCF 2009 Tamar Project* 11.0TCF 2009 Dalit 0.5TCF Haifa Turkey Cyprus Lease owned by Delek & partners Tel-Aviv Licenses owned by Delek & partners Licenses under appeal (were not extended) Option Natural gas discovery 2000 Yam Tethys 1 TCF Noa Mari-B Ashdod Egypt Israel Jordan For illustration purposes only Ashkelon *Tamar Project includes the Tamar discovery in 2009 and the Tamar South West discovery in 2013 Numbers according to Netherland Sewell & Associates ( NSAI ) refer to reserves and resources (Contingent & Prospective) in the best estimate category, and include produced volumes 7 7

8 Highlights of the Approved Government Outline Leviathan Leviathan ownership to remain unchanged Tamar Delek to sell Tamar holdings within 6 years (31% holding) Noble Energy will reduce stake to 25% (from 36% holding) Tanin and Karish Delek and Noble will sell entire holdings in Tanin and Karish within 14 months (if not sold, additional 4 months will be added for a trustee to sell); export quota of 47BCM will be transferred to Leviathan Pricing and Contracts Existing contracts and agreements will not be reopened In the new contracts for the interim period, off takers can choose between: Israeli Hub (an average domestic market price) Price formula linked to Brent (for industry off-takers mainly) PUA (the average price of natural gas sold to independent electricity producers) Price (and linkage) in accordance with the export price agreements Taxation: regulating the tax regime for export sales * On May 22, 2016, the Israeli Government re-affirmed its decision concerning the Natural Gas Outline, and established an alternative arrangement for a 'stable regulatory regime' 8 8

9 Departure of Tanin and Karish As part of the approved Natural Gas Governmental Framework; Jan Delek partnerships acquired Noble s rights (47.059%) for approx. US$ 70 million (amount invested so far) Aug Agreement signed between Delek partnerships and Ocean Energean for sale of all rights in Tanin and Karish leases, for US$ million In addition, Delek partnerships will be entitled to overriding royalties: rate of 7.5% (relative to 100% of the rights in the Leases) before payment of the petroleum profit levy, and rate of 8.25% (relative to 100% of the rights in the Leases) immediately upon commencement of payment of the Levy; Existing overriding royalties holders remain unchanged, net to the Delek partnerships entitlement to royalties as listed above 9 9

10 Vision of the Israeli Natural Gas Upstream Market Energy Security Following the Gas Government Outline: Redundancy in gas supply to the domestic market from three separate producing reservoirs For illustration purposes only 10 10

11 Projects Update 11 11

12 Tamar Project World Class Project Execution Operator Noble Energy Inc. Natural Gas (2P) Reserves 10.3Tcf (292BCM) 1 Condensate (2P) Reserves 13.3MMBoe 1 First Gas Produced 30 th March 2013 Development Cost $3.2bn (100%) Well Production Capacity over 250MMCF/D each (5 wells) Processing Capacity Phase 1: ~1.0 Bcf/d Tamar Mari-B For illustration purposes only Current Steps FID on Tamar-8 (6 th well) to begin in Q4 2016; Part of expansion (if approved) of up to 20.4BCM/Y (1,974 mmcf/d) 3 Successful 144A bond raise of $2bn Regional Export: Signed agreements Egypt: Dolphinus Holdings, for 250 mmcf/d for 7 years (interruptible) Jordan: Arab Potash & Jordan Bromine, total of up to 2BCM (~70.62 BCF), expected to start in 2016 for 15 years Non-binding LOI Egypt: Union Fenosa for 4.5BCM/Y (435 mmcf/d) with an option to increase up to 7BCM/Y (677 mmcf/d) for 15 years 4 Working Interest Noble 36.0% Isramco 28.8% Avner 15.6% Delek Drilling 15.6% Dor Delek Group 2 4% 1 Reserves are as of , also includes Tamar SW, according to NSAI BCM = ~720 BCF; 4.5 BCM = ~159 BCF; 7 BCM = ~247 BCF 2 Delek Group economic interest 17.68% 12 12

13 Tamar Project Robust Contractual Structure Israel Electric Corp. IPP & Electricity Related Industry & Other Total: 87 BCM (~3.07 TCF) $14 23bn years Price linked to US CPI Total: 72BCM (~2.54 TCF) $16.9bn years Price of majority of contracts linked to electricity index Total: 8.5 BCM (0.3 TCF) + Condensate $2bn 5-8 years Price of majority of contracts linked to price of Brent Signed Contracts for Tamar Project 1 : Export 77 BCM / IEC 87 BCM (~3.07 TCF) Others 80 BCM (~2.8 TCF) 68 BCM (~2.4TCF) (~2.7TCF) 2 To Be Sold 1 Also includes Tamar SW, based on reserves before first gas 2 70 BCM is under negotiation with UFG 13 13

14 Tamar Solid Cash Generating Project Million $ 2015* 2016E 2017E 2018E Sales (BCM/Y) Revenue 1,478,723 1,798,412 2,154,276 2,224,801 Opex 168, , , ,095 EBITDA 1,109,042 1,395,815 1,444,452 1,750,511 Cashflow 842,872 1,164,869 1,134,014 1,430,479 * Pro forma numbers for Tamar 100% based on company reported YE 2015 financial ** Estimated numbers based on company reported NSAI DCF, as of

15 Tamar Expansion Unlocking Further Value Source: Noble Energy 15 15

16 Tamar Monetization Process According to the Government Framework, Delek to sell entire holdings in Tamar (31.25%) within 6 years; checking possibility to issue a traded equity (leveraged) vehicle Options are being examined, key drivers are: Maintaining flexibility; looking to dilute interest over time Goal: Maximizing value for Delek Group shareholders Increasing capital markets interest Adding value through UFG s LOI execution 16 16

17 Leviathan Game Changing Discovery Operator Noble Energy Inc. Natural Gas (2C) Resources 21.9 TCF (621BCM) 1 Condensate (2C) Resources 39.4MMBoe 1 Deep Mesozoic Prospects Prospective resources potential c. 4 TCF and 560 MMBBLO (Best Estimate) 2 Current Status Leviathan 3 and 4 appraisal wells successfully executed. Well design of over 250 mmcf/d Revised Dev. Plan approved by Petroleum Commissioner For illustration purposes only; Source: Noble Energy Expected Phase I - Single Fixed Platform with a maximum production capacity of 21 BCM/Y A high level of modularity, ~US$ 5-6 billion: Stage I mmcfd, at a cost of ~US$ billion Stage II - 900mmcfd Possible drilling deeper oil targets (no final decision has been made) First 2 local off-takers: signed agreement with Edeltech Ltd. for 6BCM over 18 years, and I.P.M. Beer Tuvia for 13 BCM over 18 years Regional Export Egypt: Non-binding LOI with BG for 7 BCM/Y (~ BCF/Y) for over 15 years; Non-binding LOI with Dolphinus Holdings for up to 4BCM/Y for years Jordan: Non-binding LOI with NEPCO for 45 BCM (~1.6TCF) for 15 years Noble 39.66% Avner 22.67% Delek Drilling 22.67% Ratio15% Working Interest Delek Group 3 1 Resources are as of , according to NSAI; 2 Resources are as of , according to NSAI; 3 Delek Group economic interest 25.65% 17 17

18 Leviathan Moving to FID June Front End Engineering Design awarded to Wood Group First stage to the domestic market, Jordan and the P.A. Capacity of 1,200 mmcfd (approx. 438 BCF/Y) Second stage adding an export module of 900 mmcfd Total capacity of 2,100 mmcfd (approx. 766 BCF/Y) Source: Noble Energy 18 18

19 Export Strategy Regional Sales Turkey Cyprus Vassilikos Energy Center Regional Sales through pipeline Jordan, Egypt, Cyprus and Turkey Mediterranean Sea Aphrodite Leviathan Tamar Israel Pipeline to Jordan FLNG Leviathan being evaluated Idku LNG (existing) Damietta LNG (existing) Egypt Pipeline to Jordan Jordan Existing Pipeline Potential Pipeline For illustration purposes only 19 19

20 Aphrodite 1st Natural Gas Discovery for Cyprus Operator Noble Energy Inc. TURKEY Appraisal well and Drill Stem Test (DST) completed in October 2013 BG recently farmed-in with 35% Natural Gas Reserves 4.6TCF (128BCM) & 9 MMBOE of Condensate 1 Discovery 2011, first well ever drilled off-shore Cyprus CYPRUS Host Facility SYRIA LEBANON Additional potential for exploration following 3D seismic survey completed in September 2013 In June 2015, Aphrodite declared commercial Outline of development plan submitted to the government of Cyprus Examining host facility options (independent for Cyprus) Current Status Aphrodite A-2 appraisal EGYPT well & productions tests successfully completed. ISRAEL For illustration purposes only JORDAN Targeting domestic and regional markets sales Jul Submitted a bid for a purchase of exploration rights offshore Cyprus, together with Capricon Oil, a wholly owned subsidiary of Cairn Energy Noble 35% BG-Shell 35% Avner 15% Delek Drilling 15% Working Interest Delek Group 2 1 Contingent & Prospective resources are as of , according to NSAI; 2 Delek Group economic interest 16.97% 20 20

21 bcfd Egyptian Local Demand Gas Supply / Demand ( ) 10 9 Domestic Gas Surplus New gas supply needed to meet demand but there is uncertainty on timing LNG and Piped imports needed to meet demand Piped imports YTF Probable Developments Onstream Fields LNG imports Good Technical Under Development Fields Demand Key risks to the forecast impacting gas demand: Increased switch from gas to oil products in the power sector Pace of coal/renewable penetration in electricity Policy implementation (subsidies etc.) Macro risks (financing, credit etc.) Note: Beyond 2015, demand is based on an unconstrained view which reflects nearly full utilisation from all industries, which is unlikely. Source: Wood Mackenzie, June

22 Asset Portfolio Discoveries Delek Controls 2P/2C/Prospective Remaining 1 Status Yam Tethys 53% 0.1TCF Depleting Tamar & Tamar SW 31% 10.3TCF Production Capacity 10BCM/Y Dalit 31% 0.5TCF Appraisal (exploration well drilled) Leviathan 45% 21.9TCF Advanced appraisal (2 appraisal wells drilled) Cyprus 30% 4.6TCF Advanced appraisal (1 appraisal well drilled) Dolphin 45% 0.1TCF Appraisal (exploration well drilled) Tanin 53% 1.2TCF Appraisal (exploration well drilled) Karish 53% 1.8TCF Appraisal (exploration well drilled) Total 40.5TCF 1 Reserves and resources according to NSAI 22 22

23 The Delek Group Opportunity 23 23

24 Moving into International E&P Market Objective is to establish a further leg for the Group's operations, with emphasis on: Operating Capabilities Operator with capabilities for exploration, development and production of oil and gas, particularly offshore Geographical Diversification Portfolio of oil and gas assets abroad 24 24

25 Major Strategic Process Started in the North Sea Ithaca Energy, Inc. Oct Delek Group acquired 20% of Ithaca Energy Delek Group is the largest shareholder; entitled to 2 board seats Ithaca Energy (TSX: IAE, LSE AIM: IAE) is an oil and gas operator focused on North Sea production, appraisal, development and production activities Core specialty as an operator is the development of offshore oil & gas assets Source: Stella development program, Ithaca Energy 25 25

26 Long Term Strategy Strong Cash Balance Continued advancement of our focus on energy, while utilizing our outstanding financial capabilities Geographical Diversification Leveraging our leading presence in Israel s upstream industry into the international arena Synergistic Acquisition Synergistic acquisitions in the international energy sector with E&P operational capabilities 26 26

27 Reducing Leverage & Increasing Financial Flexibility Cash Balance (Billions NIS) 1 Bond & Loan Schedule for Delek Group and Headquarter Companies (Millions NIS) 2 Bonds Bank Loans ,026 Sep 15 Dec 15 Mar 16 June 16 Q3-Q Including credit lines 2 Excluding interest payments; correct as of June 30,

28 NIS Millions Long Term Shareholder Value Delek Group has Distributed ~2.4bn NIS in the last 5 years Dividend Yield of 6.1% H

29 Delek Group Leading E&P Player in a Region with Huge Potential Delek Group has the broadest portfolio of oil & gas assets in the Eastern Mediterranean Delek Group has unparalleled expertise with a long history of managing large and complex projects Significant upside and opportunities from unexplored fields as well as export potential of natural gas Delek Group s divestiture of noncore assets is a shortterm catalyst for increasing and realizing shareholder value 29 29

30 Appendix 30 30

31 Appendix 1 - Net Income According to Contribution by Segment (NIS Million) 6M M 2015 Q Q FY 2015 Oil & Gas Exploration & Production Operations Fuel Operations in Israel Automotive Operations Contribution to continuing operations before sold-off operations, discontinued operations and capital and other gains Finance expenses & Others 1 (62) (71) 4 (121) (472) Net Income Attributed to Company Shareholders It is noted that the Group's share in the earnings of the Avner Partnership are affected by the write-down of excess acquisition costs, as the investment in the Avner Partnership was previously revalued. Furthermore, data for the reporting period includes the Company's share in the results of Ithaca Energy ("Ithaca"), consisting of a loss of NIS 4 million (NIS 13 million in the second quarter). 2 Data for the reporting period includes NIS 73 million in losses on impairment of investments in the Company's marketable securities portfolio. On the other hand, the Company included NIS 65 million in tax income as a result of a reduction in the tax rate in Israel (see also Notes 4 and 9 to the financial statements). In the reporting period, the item also includes gains of NIS 16 million on the disposal of the investment in Republic, and gains of NIS 21 million on the disposal of financial investments. Furthermore, the item also includes the results of other operations, unattributed finance expenses, other expenses, the results of discontinued operation and tax expenses. Please review the full report available on the Group's website to view the notes for each of the items above

32 Appendix 2 - Net Financial Debt NIS million (US $ million) 6,967 ($1,786) 5,981 ($1,533) 3,337 ($856) 4,566 ($1,170) 4,330 ($1,126) Q

33 BCM Appendix 3 - Accelerated Natural Gas Demand in Israel Government Continues to Shift Power Generation to Gas Natural gas to replace coal in a number of power stations (total of 1,440MW) starting 2015 Transportation: By 2040 Government targets are; ⅓ of private transport & ⅔ of public transport will run on CNG and methanol Demand Forecast for Natural Gas in Israel Electricity Industry Transportation Methanol 0 Industrial use of natural gas in place of heavy fuel; Expected annual growth of ~6% until 2025, (in comparison to European annual demand growth of ~1%) Growth is driven by the addition of small businesses to the inland natural gas transmission system Creation of new industries based on natural gas as a raw material, e.g. methanol or GTL Fuel Mix for the Production of Electricity in Israel 2 Natural Gas Coal Renewables 72% 49% % % 18% 1 Source: The Inter-ministerial Committee to Examine the Government's Policy Regarding Natural Gas in Israel ( Zemach ) final recommendation report dated Source: Natural Gas Authority, May

34 Appendix 4 - Zemach in Details June 23 rd Final government decision adapts main Zemach recommendation (Commission for examining government policy on the natural gas industry in Israel) Total gas quantities that can be exported currently 360BCM (will increase with additional discoveries) Based on 29 years of projected domestic demand 540 BCM held back; Reservoirs with reserves higher than 200BCM have to retain 50% of the reserves to the local market; BCM 40% and BCM 25% Swap is allowed as long as the above is met, and a reservoir keeps at least 25% of reserves to the local market LNG facilities to be built in Israeli controlled territories unless decided otherwise in bilateral agreement with other countries All gas fields that are developed on Israel s territory and/or EEZ will be connected to the national gas transmission network Note: Published on August 29 th 2012 on adoption of the final recommendations is pending new government 34 34

35 Appendix 5 - Major Holdings in Delek Group Delek Group 52% 88% Delek Energy Systems TASE:DEOL 52% Cohen Development TASE:CDEV 20% Ithaca Energy Inc. (TSX: IAE, LSE AIM: IAE) 100% Phoenix Insurance TASE:PHOE 69% 1 57% 1 Delek Drilling LP Avner Oil Exploration Delek Israel Fuel Corp. 90% Exellence Investments Ltd. TASE:PHOE TASE:DEDR.L TASE:AVNR.L 50% 100% 1 Cumulative holdings of Delek Group IDE (Israel Desalination Enterprises) IPP (Power Station) Public companies 35 35

36 Thank you September Dina Vince 2016 Head of Investor Relations Tel: Leading Israeli Oil & Gas E&P Group 36