ينشر موقع باور نيوز الاخباري نص بيان DELEK DRIlling بشأن صفقة خروج سام زيل ويوسى ميمان من خط غاز شرق المتوسط :
Delek Drilling – Limited Partnership
(the “Partnership”)
September 27, 2018
To:
Israel Securities Authority
22 Kanfei Nesharim St.
Jerusalem
To:
Tel Aviv Stock Exchange Ltd.
2 Ahuzat Bayit St.
Tel Aviv
Dear Sir/Madam,
Re: Engagement in agreements for the purchase of EMG shares and the
purchase of rights in the EMG pipeline
Further to the provisions of Section 7.12.2(b)2(b) of the Partnership’s periodic report
as of December 31, 2017, released on March 21, 2018 (Ref. no. 2018-01-022209), the
Partnership’s immediate report of February 19, 2018 (Ref. no. 2018-01-013578)
regarding the signing of two agreements between the Partnership and Noble Energy
Mediterranean Ltd. (“Noble”) and Dolphinus Holdings Limited (the “Dolphinus
Agreements” and “Dolphinus”, respectively) for the export of natural gas to Egypt
from the Tamar and Leviathan reservoirs, the Partnership’s immediate report of March
7, 2018 (Ref. no. 2018-01-018330) on negotiations of the Partnership and Noble1 with
Eastern Mediterranean Gas Company S.A.E. (“EMG”) for the transport of natural gas
from Israel to Egypt via the EMG Pipeline (as defined below), the approval by the
meeting of holders of participation units in the Partnership for non-distribution of
profits in order to invest the same in the purchase of rights in EMG (Ref. nos. 2018-01-
062350, 2018-01-063043) (the “Unit Holders Meeting”), and Section 9 of the
Partnership’s shelf offering report dated September 16, 2018 (Ref. no. 2018-01-
084490), the Partnership hereby respectfully announces that, in order to consummate
the Dolphinus Agreement, EMED Pipeline B.V. (“EMED”)2
, signed agreements on
26.9.2018 for the acquisition of 39% of the share capital of EMG (the “EMG
Transaction” or the “Transaction”). The closing of the Transaction is contingent,
inter alia, on the signing of a Capacity, Lease & Operatorship Agreement (CLOA)
between EMED and EMG, in which EMG will grant EMED the exclusive right to lease
and operate the EMG Pipeline for the transport of natural gas from Israel to Egypt (the
“CLOA”), all as specified below:
A. General background
EMG is a private company registered in Egypt which owns a 26 inch, c. 90 km
submarine pipeline connecting the Israeli transmission system in the Ashkelon
area with the Egyptian transmission system in the El-Arish area, as well as
1 Through Noble Energy International Ltd. (“Noble Cyprus”).
2 EMED is a special-purpose company established for the Transaction and registered in the Netherlands,
whose shares are held as follows: A wholly-owned subsidiary of the Partnership registered in Cyprus –
25%, Noble Cyprus – 25%, and Sphinx EG BV, a wholly-owned subsidiary of East Gas Company which
holds, inter alia, a gas pipeline and infrastructure in Egypt (the “Egyptian Partner”) – 50%.
related facilities (jointly, the “EMG Pipeline”). The EMG Pipeline was
designed for a capacity of approx. 7 BCM per year, with an option to increase
the capacity to approx. 9 BCM per year by installing additional systems. The
flow of gas through the EMG Pipeline from Egypt to Israel was stopped several
years ago, and to the best of the Partnership’s knowledge, as of the date of this
report EMG has no commercial activity, and remains exposed to claims and
debts vis-à-vis authorities, creditors, suppliers and customers in significant
amounts3
. It is noted that in the Transaction, the Partnership is not required to
provide any collateral or guarantees for EMG’s existing debts.
As of the report date, EMG’s registered shareholders are as follows:
(1) EGI-EMG LP – 12%;
(2) Merhav M.N.P. Ltd. – 8.2%;
(3) Merhav Ampal Energy Holdings Limited Partnership – 8.6%;
(4) Merhav-Ampal Group Ltd. (“Merhav-Ampal Group”) – 8.2%;
(5) PTT Energy Resources Company Limited (“PTT”)4
– 25%;
(6) Mediterranean Gas Pipeline Ltd. (“MGPC”)5
– 28%;
(7) Egyptian General Petroleum Corporation (“EGPC”)6
– 10%.
(Shareholders (1)-(4) shall be referred to hereinafter jointly as the “Sellers”)
It is noted that the some of the Sellers, the Sellers’ shareholders, and affiliates
of the Sellers, are conducting several arbitration proceedings in international
arbitration institutions against the Government of Egypt and companies held
thereby, in connection with the termination of the transport of gas from Egypt
to Israel (jointly, the “Arbitration Proceedings”). EMG is also a party to
arbitrations vis-à-vis Egyptian state-owned companies.
B. Agreements for the purchase of 39% of the share capital of EMG
On September 26, 2018, EMED signed four separate, essentially similar
agreements with the Sellers for the purchase of EMG shares held by the Sellers,
at a total rate of 37% of the share capital of EMG (jointly, the “Share Purchase
3
According to the financial statements of EMG as of December 31, 2017 and December 31, 2016,
EMG’s assets amount to approx. $117 million and $129 million, respectively; liabilities total approx.
$505 million and approx. $487 million, respectively; and the equity deficit is in the sum of approx. $388
million and approx. $358 million, respectively. In addition, in the years 2017 and 2016 EMG did not
recognize revenues from activity and incurred losses in the sum of approx. $30 million and $26 million,
respectively. The financial statements are presented in U.S. dollars, and are prepared according to
Egyptian GAAP. It is noted that the financial figures as of December 31, 2017 and December 31, 2016
and for the years then ended are based on financial statements, on which EMG’s auditor refrained from
giving his opinion due to the materiality of the issues and reservations as stated in his opinion. It is further
noted that the said financial statements do not include a provision for potential claims by customers.
4 A public energy company partially owned by the Government of Thailand.
5
A private company controlled, to the best of the Partnership’s knowledge, by the Evsen Group, a
company headed by Dr. Ali Evsen.
6 An Egyptian State-owned company.
Agreements”), as well as another agreement for the purchase of shares at the
rate of 2% from MGPC (the “MGPC Agreement”).
1. Highlights of the Share Purchase Agreements
a. Subject to fulfillment of the conditions precedent, the main ones
of which are described in paragraph (d) below, and the
Transaction closing conditions, the Sellers will sell and transfer
to EMED the shares of EMG held by them, totaling 37% of the
share capital of EMG (the “Purchased Shares”), including any
and all rights associated with the Purchased Shares.
b. The Sellers, the shareholders of the Sellers and the Sellers’
affiliates will waive any claim, action, award, decision, order or
remedy they have against the Government of Egypt and
companies owned thereby, in the context of the Arbitration
Proceedings.
c. In consideration for the Purchased Shares, waiver of their rights
in the Arbitration Proceedings and additional rights in
accordance with the Share Purchase Agreements, as stated
above, EMED shall pay the Sellers, on the Transaction closing
date, the sum total of 518 million US dollars (the
“Consideration”), of which each of the Partnership and Noble
shall pay an amount of approx. 185 million US dollars, with the
balance being paid by the Egyptian Partner.
d. Performance of the transaction contemplated in the Share
Purchase Agreements is contingent on the fulfillment of standard
conditions precedent, including: receipt of any and all approvals
and consents required for the transfer of the Purchased Shares
from the Sellers and registration thereof in the name of EMED;
receipt of the approvals and consents required by any law in
Egypt and in Israel for performance of the transactions
contemplated in the Share Purchase Agreements and for the
transport of the gas in the EMG Pipeline from Israel to Egypt;
signing of the CLOA and the removal of any material
impediment to the performance thereof; completion of a
technical due diligence for the EMG Pipeline, including
performance of testing on the continuous flow of gas from Israel
to Egypt through the EMG Pipeline, in the quantities and for the
period determined; restructuring of an existing debt of EMG to
an Egyptian bank and rescheduling thereof, to the satisfaction of
EMED; receipt of any and all formal approvals required by the
Sellers, including with respect to the controlling shareholder in
Merhav-Ampal Group which is undergoing liquidation
proceedings, court approvals, and the closing of all the Share
Purchase Agreements.
e. The last date for fulfillment of the conditions precedent and the
closing of the Transaction is June 30, 2019, although the parties
intend to act to close the Transaction as early as possible, and the
Partnership estimates that it is likely that the conditions
precedent in the Transaction will be fulfilled earlier than the date
stated above, such that the flow of natural gas from Israel to
Egypt through the EMG Pipeline will commence at the
beginning of 2019.
f. The Share Purchase Agreements is governed by English law.
Any dispute between the parties will be resolved in arbitration in
London (according to the rules of the London Court of
International Arbitration).
The Partnership intends to finance its investment in the EMG
Transaction by using the Partnership’s available cash flow and/or
through credit facilities from banks and/or expansion of the Series A
bond series issued by the Partnership on December 26, 2016.
2. Highlights of the MGPC Agreement
Concurrently with the signing of the Share Purchase Agreements, an
agreement was signed between EMED and MGPC, whereby MGPC
shall transfer to EMED, for no consideration, subject to and concurrently
with the closing of the Share Purchase Agreements, 2% of the shares of
EMG held thereby, against the ending of disputes between some of the
Sellers and MGPC.
Subject to and after the closing of the EMG Transaction, the
shareholders of EMG will be as follows:
(1) EMED – 39%;
(2) PTT – 25%;
(3) MGPC – 17% (controlled by Dr. Ali Evsen);
(4) The Egyptian Partner – 9%7
;
(5) EGPC – 10%.
C. The Capacity, Lease & Operatorship Agreement
As stated above, the closing of the EMG Transaction is conditioned, inter alia,
on the signing of the Capacity, Lease & Operatorship Agreement between
EMED and EMG, in which EMG will grant EMED the exclusive right to lease
and operate the EMG Pipeline for the entire term of the Dolphinus Agreements,
with an option to extend the agreement. According to this agreement, the costs
required to refurbish the EMG Pipeline, up to a sum of $30 million (which
reflects a preliminary estimate of these costs), and the current costs of operating
the pipeline, will be borne by EMED (jointly, the “Operating Costs”), while
EMG shall be entitled to receive the current transport fees to be paid by
7 To the best of the Partnership’s knowledge, MGPC intends to transfer the said shares to the Egyptian
Partner.
Dolphinus for use of the pipeline (the “Transport Fee”), net of the Operating
Costs.
D. EMED shareholders agreement
As aforesaid, EMED is a special-purpose company established for the
Transaction and registered in the Netherlands, whose shares are held as follows:
A wholly-owned subsidiary of the Partnership registered in Cyprus – 25%;
Noble Cyprus – 25%; and Sphinx EG BV, a wholly-owned subsidiary of East
Gas Company – 50%. In proximity to the date of signing of the Share Purchase
Agreements, the shareholders of EMED signed a shareholders agreement
governing the relationship between them as shareholders of EMED, including
provisions regarding material decisions, that will be made unanimously. In
addition, right of first refusal arrangements were determined for a transfer of
shares in EMED.
E. Term sheet for the use of additional infrastructures
Concurrently with the signing of the Share Purchase Agreements as described
above, an MOU was signed between the Partnership and Noble and between the
Egyptian Partner (which owns the pipeline section between Aqaba and El-
Arish, hereinafter the “Arab Gas Pipeline”) and an affiliate of Dolphinus, in
which the parties agreed that the Partnership and Noble would receive access to
additional capacity in the Egyptian transmission system, through the “Arab Gas
Pipeline”, at the entry point to the Egyptian transmission system in the Aqaba
area, that will allow for the transport of additional quantities of gas over and
above the quantities of gas that will flow through the EMG Pipeline (the
“Additional Infrastructure”), for implementation of the Dolphinus agreement
and additional agreements for the sale of natural gas to Egypt. The parties
further agreed to consider additional projects for the transmission of natural gas
from Israel to potential customers and facilities in Egypt.
F. LOIs with the Tamar partners and the Leviathan partners
In proximity to the date of signing of the EMG Transaction, Noble and the
Partnership signed a non-binding LOI with the Tamar partners and a non-
binding LOI with the Leviathan partners in connection with allocation of the
capacity, and further arrangements, in connection with the transport of natural
gas in the EMG Pipeline and the Additional Infrastructure (as defined above).
The LOI with the Leviathan partners provides that subject to, inter alia, the
signing of a definitive agreement, by June 30, 2019 and for the closing of the
EMG Transaction, the partners in the Leviathan project shall on the EMG
Transaction closing date pay the sum of $250 million in consideration for
EMED’s undertaking to allow the transport of natural gas from the Leviathan
reservoir for implementation of the Leviathan-Dolphinus agreement and the
guarantee of a capacity of 350,000 MMbtu per day in the EMG Pipeline and the
Additional Infrastructure, such that further to the provisions of Subsection
B.1.C. above, on the Transaction closing date, out of the total consideration to
be paid by the Partnership and Noble, the sum of approx. $250 million will be
paid by the Leviathan partners, such that the total consideration to be paid by
in accordance with all of the conditions of the Unit Holders Meeting approval,
as specified in the (amended) notice of meeting report of June 28, 2018 (Ref.
no. 2018-01-062350).
Concurrently, Noble and the Partnership signed a non-binding LOI with
partners in the Tamar project whereby, subject to, inter alia, the signing of a
definitive agreement by June 30, 2019 and the closing of the EMG Transaction,
the Tamar partners shall pay the Leviathan partners, by June 30, 2020, the sum
of $125 million (constituting reimbursement of 50% of the amount payable by
the Leviathan partners on the EMG Transaction closing date), in consideration
for an undertaking by EMED to allow the transport of gas from the Tamar
reservoir for the implementation of the Tamar-Dolphinus Agreement, including
sale on an interruptible basis already in early 2019, or a proportionately reduced
amount, if the total capacity of the EMG Pipeline and the Additional
Infrastructure, as confirmed by a competent technical entity, is lower than
700,000 MMbtu per day. The LOIs also include mechanisms enabling the
Leviathan partners to use any available capacity above 350,000 MMbtu per day,
insofar as the Tamar partners do not use the capacity in full. It is emphasized
that the binding agreements with the Tamar partners and the Leviathan partners,
if signed, are expected to include specific arrangements regarding regulation of
the usage of the EMG Pipeline and the Additional Infrastructure, including
arrangements with respect to the allocation of the capacity in various cases,
investments in the Additional Infrastructure and further arrangements. The
definitive agreements, if and to the extent signed, will be subject to receipt of
the relevant regulatory approvals, including the approval of the Antitrust
Authority and the approval of the Ministry of Energy, if required.
In addition to the aforesaid, in proximity to the date of signing of the Share
Purchase Agreements, Delek and Noble endorsed the Tamar-Dolphinus
agreement to all the partners in the Tamar project and the Leviathan-Dolphinus
agreement to all the partners in the Leviathan project, in accordance with the
partners’ proportionate rights in each one of the said petroleum assets.
The partners in the Leviathan project and their holding rates are as follows:
Noble Energy Mediterranean Ltd. 39.66%
Delek Drilling – Limited Partnership 45.34%
Ratio Oil Exploration (1992), Limited Partnership 15.00%
The partners in the Tamar Project and their holding rates are as follows:
Noble Energy Mediterranean Ltd. 25%
Isramco Negev 2, Limited Partnership 28.75%
Delek Drilling – Limited Partnership 22.00%
Tamar Petroleum Ltd. 16.75%
Dor Gas Exploration – Limited Partnership 4.00%
Everest Infrastructures – Limited Partnership 3.50%
Caution regarding forward-looking information: The details of information
presented above, including with respect to the possibility of the flow of gas in the
EMG Pipeline in the context of the tech DD, the terms and conditions of the
CLOA, if signed, the possibilities for financing of the Transaction, the costs of
refurbishing the EMG Pipeline, the possibility of fulfillment of the Transaction
closing conditions, and the possible date of fulfillment thereof, and the possibility
of signing of definitive agreements with the Leviathan and/or Tamar partners,
constitute forward-looking information within the meaning thereof in Section 32A
of the Securities Law, 5728-1969, which is based on preliminary estimates only.
Such information may not materialize, in whole or in part, or may materialize in
a materially different manner, due to various factors beyond the Partnership’s
control.
Sincerely,
Delek Drilling Management (1993) Ltd.
General Partner of Delek Drilling – Limited Partnership
By Yossi Abu, CEO
Yaniv Friedman, Deputy CEO
