Isramco To Raise Debt on Tamar

Isramco-Negev, one of the three main partners in Israel's offshore Tamar gas field, has said that in the next three years (2017-2019) it will distribute all its annual earnings from Tamar gas field as dividends to its shareholders, in addition to the $426mn it earned during 2016 from the field.

With a 28.75% stake in the Tamar field, Isramco is the third largest partner after Noble Energy (32.5%) and Delek Group (31.25%). But by 2020 Isramco is expected to become the largest Tamar shareholder, as Noble plans to sell down its holdings to 25% and Delek has to sell off all of its holdings.

Isramco said in a filing to the Tel-Aviv Stock Exchange (Tase) that it will raise debt in order to distribute its earnings to the shareholders and still be able to finance its other energy-related activities. Isramco plans to raise $450mn probably in the next few weeks.

Isramco's decision came as a surprise, as in the last few years the limited partnership eschewed distributing dividends and entered into a battle with a few of its investors who wanted more returns from their investment. It is not clear why Isramco, which according to The Times of Israel is co-owned by Israeli businessman Kobi Maimon, has decided to change its policy.

The significance is that Isramco now will transfer risks associated with the Tamar gas field from its shareholders to bondholders.

Tamar platform (Photo credit Delek Drilling & Albatross Aerial Perspective)

In 2014 following the formation of the Tamar partnership, Delek Group refinanced its bank loans successfully by issuing $800mn bonds. Delek plans to do the same in 2021 when it will have to re-finance loans taken from financial institutions for Leviathan development.

Last year Tamar Partnership revenues were estimated at $1.8bn, according to NGW analysis; operating income was estimated at $1.2bn. Isramco's operating profit last year stood at $340mn and net earnings at $303mn. Tamar has produced gas since early 2013.

Ya'acov Zalel