Record sales and profits in Tamar in 2016

Israel's Tamar gas field partnership both sold a record amount of gas and made a record profit in 2016. This was the fourth consecutive year that both indicators rose on the year before, according to research by NGW.

Tamar shareholders for 2016 were Noble Energy (32.5%), Delek Group (31.7%), Isramco Negev (28.75%), Alon Gas (4%) and Everest the newest partner, a limited partnership controlled by Harel Group (3.5%). Although the tag price for the transaction in which Everest bought the 3.5% stake from Noble Energy, was $431mn, Everest paid $404mn when the transaction was closed, last December, since the transaction was dated back to January 1, 2016.

Since neither Everest nor Harel Group published Everest's financial results, it is assumed here that Everest revenues and profits are in line with those of the other partners. Noble energy published only raw results.

Tamar's sales volumes totaled last year at 9.4bn m³, an increase of 13.2%. The increase is attributed mainly to a government directive to use 15% more gas in the power sector. Other sectors used very little more gas on the year.

The combined revenues of the five partners grew by 13.1% to $1.73bn, or an average price of $5.21/mn Btu. The average net price, after production costs and government royalties, was $4.2/mn Btu. Operating profit was about $1.4bn, 21% up on 2015 while net income was about $1.2bn, 25% higher. The combined net income of all the five partners was 62% of revenues, according to NGW.

(Credit: Tamar)

Profits were aided by a 6% cut in production costs to $174mn, so an average of $0.52/mn Btu.

The revenue stream from its Israeli operations was critical to Noble Energy's well-being as it continued to haemorrhage money in its other operations around the world.

In addition to an operational profit of $384mn Noble sold a 3.5% stake in Tamar for $431mn and reported a positive cash flow from its Israeli operations of some $750mn for 2016.

Noble has to sell down its shareholding in Tamar to 25% while Delek Group has to sell all its 31.5% holdings in Tamar by 2021 in order to satisfy anti-trust concerns. They are also partners in the giant Leviathan gas field.

Noble sold its 3.5% to Everest in a valuation of over $12.5bn but it might find it harder to persuade other investors to invest under the same valuation or a better one. In addition, Noble is looking for an investor to farm out up to 10% of Leviathan. It hopes that the final investment decision, which was taken last month, will raise the gas field's value. But the decision was unusually taken without sales contracts underpinning most of the production.

Delek Drilling's and Avner's CEO, Yossi Abu was compensated for his effort with NIS7.6 ($2.1mn).

Ya'acov Zalel