Delek, Avner Agree to Merge Ahead of Leviathan FID

Shareholders in Avner general partnership December 25 voted to merge with sister company Delek Drilling, having secured a month ago loan commitments for $1.75bn from HSBC and JP Morgan for developing the Leviathan field.

Both companies are subsidiaries of Delek Group. The merger is expected to be completed in about two months' time and it will create one of the biggest entities on the Tel Aviv Stock Exchange, valued at NIS 16.8bn ($4.4bn). Yossi Abu will remain CEO of the merged general partnership.

The debt issue strengthens Delek Group's position on the way to the final investment decision (FID) on Leviathan. Earlier this month Delek reported that it has secured a $1.7bn in a loan commitment letter from HSBC JP Morgan. Leviathan development phase 1 is expected to cost $4bn-$5bn and it is expected to come online the last quarter of 2019.

The new bond will be repaid in one instalment in five years' time (December 2021) at a time when Leviathan is expected to create cash flows. The bond carries a coupon of up to 4.5%.   

Meanwhile, time is running out for Noble Energy to take FID on Leviathan before the end of the year. During the last few months and since the approval of the Regulatory Natural Gas Framework, the Israeli partners insisted that it would be, even though they claim that the framework doesn’t stipulate such requirement. It is possible that according to the Framework the next milestone is an investment commitment of $1.5bn by the end of next year.

Israel's offshore blocks

(Source: govt)

Noble had said in the last few months that a FID is expected either this year or in early 2017.

Ya'acov Zalel