Delek Group announces 1Q15 results

Delek Group Ltd has announced its results for the three month period ending 31 March 2015.

1Q15 highlights

• First quarter net income stood at NIS210 million, compared with a net loss of NIS195 million in the first quarter of last year.
• Delek Group starts 2015 with a more focused business, which is reflected in its balance sheet, following the sales of various non-core assets in 2014. Delek Group's sales of Delek US shares contributed a gain of NIS115 million in the quarter.
• Delek Group continues negotiations to sell control at Phoenix Holdings Ltd as part of the Groups' ongoing strategy to focus on its E&P assets.
• The Tamar field continued successful production of natural gas and sold approximately 1.97 billion m3 in the first quarter of 2015, compared with 1.7 billion m³ last year.
• The E&P sector contributed NIS67 million to the Group's net income in the first quarter of 2015 versus NIS38 million in the same period last year.
• Declared a dividend of NIS150 million for the quarter.

Group revenues for the first quarter of 2015 were approximately NIS5.5 billion, an increase of 10% compared to NIS 5.0 million in the same period last year. Operating profit in the first quarter of 2015 totalled NIS137 million. This is compared with NIS397 million as reported in the same period last year, mainly due to a reduction from the insurance segment in Israel which was partially offset by an increase in the E&P sector. Net Income for the first quarter of 2015 totalled NIS210 million, compared with a net loss of NIS195 million in the first quarter of 2014. The improvement was due to the increased contribution of Oil and Gas Exploration, and Gas Production Operations from sales of gas from the Tamar field as well as the sale of Delek US shares which contributed NIS115 million to the Group's net income. In addition, Delek Automotive contributed NIS78 million, mainly due to its realisation of its holdings in US listed Mobileye. Cash balance at the Delek Group correct as of 31 March 2015 stood at NIS 3.8billion (including unutilised credit lines).

"The first quarter results demonstrate once again the stability and the financial strength of the Group,” said Mr Bartfeld, President and CEO of Delek Group. “We are focused on completing the sale of Phoenix to Fosun International, on the basis of the Memorandum of Understanding signed. We continue to identify international opportunities in the energy sector in order to make strategic investments which will be synergistic and complementary to the activities of the Group today."

“We believe we are moving in a promising direction in our discussions with the governmental ministries in the gas sector,” Bartfield continued. “We hope an eventual agreement will create the regulatory certainty that is necessary to carry out investments by the partnerships. Specifically, to accelerate the development plans of Leviathan and expansion of the Tamar Project, after receiving the required approvals."

Business highlights

Oil and Gas Exploration Sector

Tamar Project

11 trillion ft³ natural gas discoveries (Tamar and Tamar SW). Tamar produced 1.97 billion m3 of natural gas in the first quarter of 2015, compared with 1.7 billion m³ (including Yam Tethys) in the same period last year. In addition, Tamar sold 93 million bbls of condensate in the first quarter of 2015, compared with 76 million bbls in the previous year.

On 2 April 2015, the Prime Minister of Israel, Minister of National Infrastructure, Energy and Water Resources, and the Petroleum Commissioner of Energy and Water Resources, approved the export of fixed quantities of natural gas from the agreement signed by the Tamar partners on 19 February 2014, with NBL Eastern Mediterranean Marketing Limited, which signed back to back agreement with two companies from Jordan, Arab Potash Company and Jordan Bromine Company.

In May 2015, Israel Electric Corporation (IEC) partially exercised the second option. As a result the maximum total amount the Tamar partners will supply IEC will amount to 87 billion m³ instead of 99 billion m³.

Leviathan

A 22 trillion ft³ natural gas discovery. Leviathan partners continue working with the various regulators in order to reach an agreement for a comprehensive solution in order to create the necessary certainty for the partners to make the needed investment decisions for the development of the Leviathan project and Tamar's expansion project.

Gas production summary

Net income from the sector for the first quarter of 2015 was NIS67 million, an increase compared to a net income of NIS38 million in the same period in 2014. The growth was mainly due to the increase in revenues from the Tamar project as well as a decrease in financial expenses. In total, gas production reached 1.97 billion m³ in 1Q15. Net finance expenses in the reporting period amounted to NIS60 million, compared to NIS120 million in the same period last year, a decrease of NIS60 million. The decrease in finance expenses compared with last year was primarily due to the recognition in the first quarter of 2014 of finance expenses due to LIBOR hedges in the amount of NIS40 million.

Downstream Energy Sector

Delek – the Israel Fuel Company Ltd (fully held by Delek Group)

Contribution to net income in the first quarter of 2015 amounted to NIS15 million compared with a profit of NIS28 million in the same period last year. The decrease was primarily due to decreased revenues, which resulted from a worldwide drop in distillate prices. This decrease was offset by higher sales volumes in refuelling and retail areas.

Delek US (2.0% held by Delek Group)

During the first quarter of 2015, Delek Group completed the sale of an additional 5% of its holdings for a total consideration amount of US$115 million, contributing NIS115 million to the Group's net income in the first quarter of 2015. Following the sale, the company holds approximately 2.0% of the outstanding share capital of Delek US.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.hydrocarbonengineering.com/refining/28052015/delek-group-announces-1q15-results-858/