Sunday, December 18, 2016

Decision to Carry Out Drilling of Leviathan-5 - DELEK GROUP

Tel Aviv, December 18, 2016

Delek Group (TASE: DLEKG, US ADR: DGRLY) (“the Company”) provides below an Immediate Report just submitted by each of Delek Drilling Limited Partnership and Avner Oil Exploration Limited Partnership ("the Partnerships") concerning the decision of the Leviathan Partners, including the Partnerships, to carry out an appraisal and production well at Leviathan-5 in the area of the Leviathan North I/15 lease.Economic working interest of the Company in the drilling budget: 25.65%. Economic working interest of the Company in future revenues from the well: before return of investment - 22.28%; after return of investment - 22.95%, taking royalties into account.

Pursuant to what was stated in the Partnerships' Annual Reports dated December 31, 2015 that were published on March 28, 2016 ("Annual Reports"), concerning the scheduled work plan for the Leviathan Project located in the area of Leviathan I/14 and Leviathan North I/15 leases ("the Leviathan Project" or "Leviathan Field" and "Leviathan Leases" respectively), announces that on December 15, 2016 the Leviathan Partners took a decision in respect of carrying out an appraisal and production well at Leviathan-5 in the area of the Leviathan North Lease I/15 ("Leviathan-5 Well" or "the Well").
Additional details follow concerning the Well:
  1. Date of decision to drill the Well: December 15, 2016.
  2. Reasons for decision:
Noble Energy Mediterranean Ltd. ("Noble" or "the Operator") recommended to the Partnerships to carry out an additional Appraisal Well for Leviathan, which will become part of the series of production wells in the Leviathan Field, as part of the updated development plan for the Leviathan Field, as stated in the Annual Reports ("the Development Plan").
  1. Terms for drilling the Well and participation in its execution: The Petroleum Commissioner at the Ministry for National Infrastructures, Energy and Water Resources ("the Commissioner") has confirmed the Development Plan, as stated in the Partnerships' Immediate Reports dated June 2, 2016, whereby the Leviathan-5 Well will be drilled as an Appraisal Well, and will subsequently be connected as a production well to the production system of the Leviathan Project. The Operator has submitted to the Commissioner and to the Ministry for Protection of the Environment the applications for the various approvals required, including the drilling plan, delivery permit, and a pre-drilling environmental survey. It should be noted that the drilling rig to be used is the one currently drilling the development and production well of Tamar-8, as stated in the Partnerships' Immediate Reports dated July 3, 2016 ( "Tamar-8 Well"), and according to the Operator's reports, complies with the various requirements set by the Commissioner and the Ministry for Protection of the Environment.
  2. Name of Well: Leviathan-5
  3. Location of Well: Maritime Well, approx. 130 km west of Haifa.
  4. Dates of drilling: Drilling is expected to commence in the first quarter of 2017 immediately after completion of drilling Tamar-8.
  5. Target layers of Well: Layers from Oligo-Miocene age.
  6. Type of Well, purpose and future stages subject to findings: Appraisal Well intended to reinforce the estimates of the Operator and the Partnerships concerning the field and its quality, and also planned to be used in the future as a production well.
  7. Depths: Depth of the waters at the Well site approx. 1,740m, and the final, planned depth for the Well is about 5,200m below sea level.
  8. Budget: Total (100%) budget is USD 77 million (excluding cost of completion and connection to the Leviathan Field production system). It should be noted that this drilling budget is included in the development budget of stage 1A in the development plan, as approved by the Board of Directors of the Partnerships' General Partner, as stated in the Partnerships' Immediate Reports dated December 12, 2016.
  9. Operator: Noble.
  10. Company carrying out drilling: Noble.
  11. Working interest of the Partnerships in the drilling budget: 22.67% each.
  12. Delek Drilling working interest in future revenues from the Well: before return of investment - 19.16%; after return of investment - 16.89%, taking into account royalties to the government, related parties and others.
  • Avner working interest in future revenues from the Well: 18.48%.
  1. Partners on the oil asset where the drilling will take place and their share of drilling budget:
Names of PartnersWorking interest of each partner in drilling budget
Delek Drilling Limited Partnership
Avner Oil Exploration - Limited Partnership
Ratio Oil Exploration (1992), Limited Partnership

  1. Reference to description of oil asset in the Annual Report: A detailed description of the oil asset will be found in section 7.5 of the Partnerships' Annual Reports.

Asaf Bartfeld, President & CEO of Delek Group, Chairman of Delek Drilling: “The Appraisal Well for Leviathan-5, which in the future will be connected to the Leviathan Field production network, joins a series of steps that we have announced related to financing the development. These steps, as well as authorizing the Delek Group Partnerships (Delek Group economic WI - 25.65%) to take the FID for development of the Field, will allow us to comply with the timetables to produce natural gas from Leviathan by the end of 2019”.