Israeli Delek to Spin off Units
Israel’s largest energy company Delek Drilling plans to split the company into two, it said in a stock exchange filing March 18. One will remain as Delek Drilling, a limited partnership, and will hold the Tamar gas field assets and liabilities; while a special purpose entity (SPE) will hold the assets and liabilities of Leviathan project, offshore Israel, and the Aphrodite project, offshore Cyprus.
The SPE will be international and will later seek to register for trading in the London Stock Exchange. The plan has yet to be approved by Israeli regulators.
According to the Natural Gas Framework for the Israeli market, adopted by the Israeli government three years ago, Delek Drilling has to liquidate all its holdings in Tamar by the end of 2021. It has 22.5% of Tamar and 43.9% of Leviathan. The group also has operations in the North Sea, as the owner of Ithaca; and in the Gulf of Mexico.
Following the company's split, Delek Drilling shareholders will receive, as a distribution in kind, shares in the new SPE, proportionate to their holdings in Delek Drilling. According to Delek Drilling, the new structure will potentially unlock value for participants by providing a more suitable platform for listing a large cap oil and gas business. It will also increase liquidity through a higher volume trading platform. The split would also improve Delek's group access to the international financial markets and analyst coverage by international brokers specialising in upstream oil and gas companies.
In 2017 Delek Drilling established an SPE, Tamar Petroleum, to unload 9.25% of its shareholdings in Tamar gas field. Later Noble Energy used that vehicle to unload 7.5% of its shares in Tamar. Since then, the shares have lost about a third of their value. Lately an investor in company filed a class action against Tamar Petroleum because of unfulfilled promises for dividends distribution in its pre-issue filings. After the class action was filed, Yossi Abu, Delek Drilling CEO, resigned from his post as Tamar Petroleum Chairman and last week he resigned from his membership in the Board of Directors.
Delek Group, Delek Drilling's controlling shareholder, had long term plans to register the company in London, as it seeks to become an international player in the upstream oil & gas industry.
It is following in the footsteps of Greek explorer Energean, whose main project is the $1.6bn development project of Israel’s Karish and Tanin gas fields. In March last year Energean raised $460mn in an IPO in London. Since then, with no apparent reason, the stock went up almost 85% to a record $834mn in intraday trading in London March 18.
In November Energean performed a dual listing on the Tel Aviv Stock Exchange. Since then the shares price has risen almost 35%. At the same time, Delek Drilling PUs and Delek Group shares were up 14% and 17% respectively.