Delek Group April 2017

Transcription

1 Delek Group April 2017 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 $2.8bn market cap, part of the TA 35 index Long term track record of growth and attractive dividend policy Issued NIS 2.8 billion in dividends in last 6 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 Turning into an international E&P company Reducing financial leverage Maintaining the dividend yield Listing on a foreign Stock Exchange 4 4

5 Long-term Vision International Independent E&P Group INTERNATIONAL EAST MEDITERRANEAN North Sea North America Egypt Palestinian Authority Turkey Israel Cyprus Jordan 5 5

6 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) 6 6

7 East Med. E&P 7 7

8 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 8 8

9 Vision of the Israeli Natural Gas Upstream Market For illustration purposes only Stable Regulatory Environment following approval of Government Gas Outline Redundancy in gas supply to the domestic market from three separate producing reservoirs 9 9

10 Projects Update 10 10

11 Tamar Project World Class Project Execution Operator Noble Energy Inc. Natural Gas (2P) Reserves 10Tcf (282BCM) 1 Condensate (2P) Reserves 13MMBoe 1 First Gas Produced 30 th March 2013 Development Cost to First Gas $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 Atwood Advantage spudded Tamar-8, the 6 th producer well at Tamar, on October 24, 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% 11 11

12 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 ~50% ~35% ~15% 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 12 12

13 Tamar Divestment Process According to the Government Framework, Delek to sell entire holdings in Tamar (31.25%) by the end of 2021; 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 13 13

14 Leviathan Game Changing Discovery Operator Noble Energy Inc. Natural Gas (2P + 2C) Resources 21.9 TCF (621BCM) 1 Condensate (2P+2C) Resources 39.4MMBoe 1 Deep Mesozoic Prospects (P50) 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 Phase I - Single Fixed Platform with a maximum production capacity of 21 BCM/Y A high level of modularity, ~US$ 5-6 billion: Possible drilling deeper oil targets (no final decision has been made) Local Market TCQ signed so far: 31BCM at an estimated total revenues of US$ 7 billion (100% WI) Regional Export Egypt: Non-binding LOI with BG-Shell for 7 BCM/Y (~ BCF/Y) for over 15 years; Non-binding LOI with Dolphinus Holdings for up to 4BCM/Y for years Jordan: Sep Agreement signed with NEPCO for 45 BCM (~1.6TCF) for 15 years; estimated total revenue of US$ 10 billion 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% 14 14

15 Leviathan Final Investment Decision Feb. 23, 2017 FID for the development of Phase 1A sanctioned by the Leviathan partners First stage (1A) to the domestic market, Jordan and the P.A. - capacity of 1,200 mmcfd (approx. 438 BCF/Y), at a cost of US$ 3.75 billion Second stage (1B) adding an export module of 900 mmcfd; total capacity of 2,100 mmcfd (approx. 766 BCF/Y), at a total cost of ~US$ 5-6 billion Source: Noble Energy 15 15

16 The Actual Leviathan Phase 1A 1.2 bcf/d module development detailed design is moving forward 4 Subsea wells, each capable of up to 400 mmcfd (4.1 bcm/y) Manifold entering 6 slots 4 infield flowlines/umbilical 2 X 18 subsea tieback flowlines, 117 km each capable of up to 600 mmcfd (6.2 bcm/y) 2 MEG flowlines 3 Process trains each capable of up to 450 mmcfd (4.6 bcm/y each) 16 16

17 Development Work Plan Schedule Project Phase Source: Leviathan s Operator (NBL) 17 17

18 Leviathan Sub Surface Development & Production Wells Lev-5 Lev-4 Lev-7 Lev-3 Lev 5 Lev 3 Lev 7 Lev 4 Legend: - Existing well - Planned well 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 In June 2015, Aphrodite declared commercial 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 Current Status Aphrodite A-2 appraisal well & Drill Stem Test (DST)completed successfully in October EGYPT 2013 Potential for exploration following 3D seismic survey completed in September 2013 SYRIA CYPRUS LEBANON Host Facility ISRAEL For illustration purposes only JORDAN Outline of development plan submitted to the government of Cyprus Examining host facility options (independent for Cyprus) 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 ( ) Significant consumption of over 50 BCM/Y, and increasing by Approx. 8% year on year (2001 to 2012) Additional gas is required for two existing LNG facilities, consuming approx. 17 to 20 BCM/Y Natural gas is currently imported using two floating regasification terminals (FSRU s); an additional FSRU is being considered Egypt is fast tracking new developments such as West Nile Delta and Zohr to restore supply, but is short of gas even if the latter is over 22.5 TCF recoverable Note: Beyond 2015, demand is based on an unconstrained view which reflects nearly full Piped imports utilisation from all industries, which is YTF unlikely. Probable Developments Source: Wood Mackenzie, June 2016 Onstream Fields LNG and Piped imports needed to meet 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.) Domestic Gas Surplus LNG imports Good Technical Under Development Fields Demand New gas supply needed to meet demand but there is uncertainty on timing 21 21

22 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 22 22

23 Asset Portfolio Discoveries Delek Rights 2P/2C/Prospective Remaining 1 Status Yam Tethys 53% 0.1TCF Depleting Tamar & Tamar SW 31% 10.3TCF Production Capacity 11.5BCM/Y Dalit 31% 0.5TCF Appraisal (exploration well drilled) Leviathan 45% 21.9TCF FID of Phase 1A; first gas by end of 2019 Cyprus 30% 4.6TCF Advanced appraisal (1 appraisal well drilled) Dolphin 45% 0.1TCF Appraisal (exploration well drilled) Tanin Karish Entitled to Overriding Royalties 1.2TCF 1.8TCF Sold Sold 1 Reserves and resources according to NSAI 23 23

24 Strategy 24 24

25 Moving into International E&P Market 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 25 25

26 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 Feb Delek Group signed a Support Agreement for a Recommended Takeover bid for Ithaca Energy shares The offer to be published by the end of March will be to purchase from all Ithaca shareholders all of Ithaca's share capital (including shares arising from exercising the convertible securities) not held by the Company; At a price of CAD 1.95 per share and a total consideration of CAD 681 million (USD 524 million) Delek Group will receive the support of Ithaca's Board of Directors for the takeover bid, according to the Support Agreement The foregoing share price reflects Ithaca's value (100%) of CAD 841 million (approximately USD 647 million (including shares arising from exercising the convertible shares) 26 26

27 Additional Steps Acquisition of 13% of Faroe Petroleum Faroe Petroleum is an Independent E&P in Norway and the UK Current production of 16,000-18,000 boep/d including the recently acquired DONG assets Looking to multiply its daily production to 40,000-50,000 boep/d within 5 years Successful bid for exploration license in Canada - Block 7 (WI of 70%) Block 7, spread over about 2,000 sq. km. at an estimated target depth of 4,500 meters from sea level (sea depth is about 1,400m). In accordance with a report published by the Provincial Government of Newfoundland and Labrador, the potential in the West Orphan geological basin, where Block 7 among others is located, is 25.5 billion barrels of oil and 20.6 TCF of natural gas, in Gas In Place terms 27 27

28 Financials 28 28

29 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 , , ,474 June 16 Sep 16 Dec 16 Mar Including credit lines 2 Excluding interest payments; correct as of December 31, Includes the recent bond expansion of series B31 in February,

30 NIS Millions Long Term Shareholder Value Delek Group has Distributed ~2.8bn NIS in the last 6 years Dividend Yield of 5.4%

31 Net Financial Debt NIS million (US $ million) 6,967 ($1,786) 5,981 ($1,533) 3,337 ($856) 4,566 ($1,170) 4,420 ($1,150)

32 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 32 32

33 Appendix 33 33

34 Appendix 1 - Net Income According to Contribution by Segment (NIS Million) Q Q Oil & Gas Exploration & Production Operations Fuel Operations in Israel (24) 11 Automotive Operations Contribution to net income from continuing operations before finance, capital and other gains Profit from oil and gas asset sales Finance & Other income (expenses) (142) (472) (4) ) 25( Net Income Attributed to Company Shareholders (1) After selling the rights to 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)

35 Appendix 2 - 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' 35 35

36 Appendix 3 - Accelerated Natural Gas Demand in Israel 2020 onwards Electricity Private electricity producers ~2.5 BCM/Y ; Coal-fired Rabin A replacement ~2BCM/Y ; Further Coal-fired power plant conversion ~2 BCM/Y ; Railway electrification ~0.5 BCM/Y Transportation Natural gas for transportation 0.2 BCM/Y in 2020 increasing to approximately 2 BCM/Y in 2030 Industry & Distribution Industry and distribution ~2.5 BCM/Y; Ammonia facility and related products: ~ BCM/Y Beyond existing Tamar agreements and current market consumption Conversion of coal-fired power plants, railway electrification project, ammonia facility, transportation and development of the distribution network that will facilitate connection of additional factories are contingent upon a supportive and promoting policy by the relevant governmental entities 36 36

37 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 37 37

38 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. 100% 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 38 38

39 Thank you Dina Vince Head of Investor Relations Tel: Leading Israeli Oil & Gas E&P Group 39