Tel Aviv, July 18, 2016. Delek Group (TASE: DLEKG, US ADR: DGRLY) ("the Company") announces that as part of its strategy to identify international investment opportunities in the energy field, it is negotiating with EnQuest PLC, which is involved in the exploration, development and production of natural gas and oil and whose shares are traded in London under the symbol ENQ.L ("EnQuest"), for the acquisition of 20% of the rights in the exploration and production licenses of the Kraken Field in the British sector of the North Sea, and a Joint Operating Agreement (JOA) and other agreements related to the project ("the Transaction"). As part of the negotiations, a wholly owned foreign subsidiary of the Company ("the Buyer") has signed a non-binding Memorandum of Understanding and is negotiating the signature of a binding agreement with EnQuest Britain Limited, a wholly owned subsidiary of EnQuest ("the Seller"). The main terms of the agreement are as follows:
- The Buyer will buy from the Seller 20% of the participation rights in the Kraken oil field located in Blocks 9/2b and 9/2c that are in License P1575 in the British sector of the North Sea, approximately 350 km north east of the city of Aberdeen. The Kraken field is spread over 42 km at a depth of 1,300 meters below sea level (the sea depth is about 110 meters), and contains, according to the Seller's reports, backed up by a third-party assessor on its behalf, about 147 million barrels of heavy crude oil (approx. 14 API) in the 2P probable reserves category. According to the Seller's reports, production from the field is expected to commence in the first half of 2017, and will take place using 25 wells (14 for production and 11 for injection) using a floating production and storage offload - FPSO ("the Oil asset" or "the Project"). In addition to the Seller, who prior to the transaction held 70.5% of the Oil Asset, the other 29.5% are held by Cairn Energy PLC, which is also involved in the exploration, development and production of natural gas and oil, and whose shares are traded in London under the CNE.L symbol.
- The transaction will take place, if it takes place, either by way of a direct holding in the rights to the Oil Asset or, alternatively, by way of the transfer of shares of a company wholly owned by the Seller that holds 20% of the rights to the Oil Asset ("the Oil Asset").
- The rights in the Oil Asset will be transferred from the Seller to the Buyer in return for an investment commitment by the Buyer for its share in the Project (20%), commencing January 1, 2016 ("the Effective Date"). Subject to signature of the binding agreement, completion of due diligence and fulfillment of the contingent terms in the agreement, the Buyer will be responsible for all the costs actually spent for the acquired rights from the Effective Date onwards as part of the Project under the Joint Operating Agreement. Based on the information made available to the Company by the Seller, the Buyer's estimated investment in the Project from the Effective Date up until the date of commencement of production is expected to be USD 162 million (for 20%). It should be emphasized that from the start of investments in the Project in 2012 until the Effective Date (namely until December 31, 2015) USD 230 million have been invested in development of the Project (for 20%).
- Moreover, at the completion date of the agreement, the Buyer will make available to the Seller the amount of USD 20 million for a period of 5 years at annual interest of 3% ("Contingent Consideration"), which shall be additional consideration for the Seller at the time that the Buyer receives full return of its investment (Capex and Opex), plus the Contingent Consideration. In the event that the Buyer does not obtain a return of its investment in the Project within 5 years from the completion date, the Seller will repay to the Buyer the Contingent Consideration.
- In addition to the foregoing, the parties are discussing possible mechanisms for additional deferred consideration that will be stipulated, if stipulated at all, in the binding agreement.
- As of the date of this report the parties are working on the signature of a binding agreement within the coming weeks, however, there is no certainty that a binding agreement will indeed be signed.
- Several contingent terms usual in such transactions have been included in the binding agreement, including the approvals required under British law for the transfer of the rights.
In accordance with Ordinance 36(B) of the Securities Ordinances (Immediate and Periodic Reports), 1970, the report on the Memorandum of Understanding was held up by the Company until this time, however, since the Company is assessing a possible offering of debentures as stated in the report dated July 13, 2016 (ref no. 2016-01-081748), the Company is publishing this report.
Warning of forward looking information: The information stated above in respect of the main terms of the Transaction, including in respect of details of the Transaction including timetables and reserves, the possibility of signing an agreement, the consideration and contingent terms, are forward looking information in the meaning of the term in section 32a of the Securities Law, for which there can be no certainty that it will take place, in whole or in part, in the manner stated or in any other manner, and it may take place in a manner materially different, and in particular there can be no certainty that the parties will sign a binding agreement, in the terms described in this report or other terms. It should also be noted that signature of a binding agreement as stated is subject, inter alia, to completion of due diligence, completion of negotiations and receipt of approval of the competent bodies, and the required approvals in law, as shall be required.
This is a convenience translation of the original HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on MONTH DD, 2015.
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
Investor Relations Manager
Tel: +972 9 863 8444
Source: The Delek Group