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Delek Group Announces Memorandum of Understanding for the Joining of Woodside Petroleum to the Leviathan Project (Licenses Rachel/349 and Amit/350)

TEL AVIV, Israel, Feb. 7, 2014 /PRNewswire/ -- Delek Group (TASE: DLEKG, OTCQX: DGRLY) ("the Company") Further to that stated in Section 1.11.27(J) of the Company's Annual Report, as amended on July 4, 2013, with regard to Woodside Energy Mediterranean Pty. Ltd., an Indirect wholly owned subsidiary of Woodside Petroleum Ltd.'s ("Woodside") offer to join the Leviathan project which is located in the area of licenses Rachel/349 and Amit/350 ("Leviathan Project"), the Company is pleased to announce that Delek Drilling Limited Partnership and Avner Oil Exploration - Limited Partnership (separately "partnership", together "the Partnerships") published today an immediate report, with regard to signing a non-binding memorandum of understanding ("MOU") with Woodside to join the Leviathan Project. Highlights of the MOU are detailed in the below immediate report as published by the Partnerships';

Further to the provisions of Section 9.7.27 of the Partnership's shelf prospectus of May 31, 2013, as amended on August 5, 2013, regarding the offer of Woodside Energy Mediterranean Pty. Ltd., fully owned subsidiary of Woodside Energy Ltd. ("Woodside"), to join the Leviathan project within the area of the 349/Rachel and 350/Amit licenses (the "Leviathan Project" and the "Licenses", respectively), the Partnerships respectfully announce that in order to promote the investment and development of Leviathan Project, the partners in the Leviathan Project, on February 7, 2014, including the Partnerships (the "Leviathan Partners") and Woodside, signed a non-binding MOU for the joining of Woodside to the Leviathan Project (the "MOU"), the main points of which are as follows:

1. Woodside shall join the Leviathan project and purchase from the Leviathan Partners 25% of the rights in the Leviathan Project, and the penetration rates of the existing partners in the Leviathan project will be updated accordingly as follows:

Noble Energy Mediterranean Ltd. ("Noble")

-

9.66%

Avner Oil Exploration - Limited Partnership ("Avner")

-

5.73125%

Delek Drilling - Limited Partnership ("Delek")

-

5.73125%

Ratio Oil Exploration (1992) - Limited Partnership ("Ratio")

-

3.8775%

Total

-

25%

2. Woodside and the Leviathan Partners will conduct exclusive negotiations to complete detailed and binding agreement (the "binding agreement") for the joining of Woodside to the Leviathan Project by March 27, 2014, in a binding agreement in accordance with the principles specified in the MOU, the main points of which are described below.

3. In consideration of its joining to  the Leviathan Project, Woodside shall undertake to pay the Leviathan Partners, the total sum of up to U.S. $2,550 million (net of $160 million royalties payment as specified below), and payments for petroleum (if discovered) in several cumulative installments, as specified below:

3.1. A payment in the sum of U.S. $850 million will be made on the closing date of the binding agreement. The said amount is after deduction of the sum of $160.31 million, which reflects Woodside's valuation of the present value of the overriding royalties which the Partnership, Avner and Ratio are obligated to pay with respect to the rights sold thereby (the "Royalties"). Woodside shall undertake to bear the said Royalties in respect of the share transferred to her in the Leviathan Project from Delek, Avner and Ratio. Delek's and Avner's share in the said consideration (after deduction of the value of the Royalties as aforesaid) is $153.09 million and $186.74 million respectively.

3.2. A payment of U.S. $350 million (out of which each Partnership's share is approx. $80.24 million) will be made by Woodside in the following cases:

3.2.1. Upon the making of a final investment decision to build a plant for the liquefaction of natural gas from the Leviathan Project (LNG or FLNG), provided that Woodside voted in favor of such decision; or

3.2.2. If a project is carried out for the export of gas from the Leviathan Project other than by way of LNG in which Woodside participates in ("Non-LNG Export Project"), two payments will be made in the sum of $175 million each (out of which each Partnership's share in each payment is approx. $40.12 million), in the following cases:

a. $175 million will be paid pursuant to signing of binding long-term agreements (If to be signed and providing the main suspending conditions are fulfilled) for the supply of gas from a Non-LNG Export Project, which include an undertaking to purchase natural gas in an average daily quantity of at least 340 million cubic feet or in the case of actual supply of natural gas from a Non-LNG Export Project at an average daily scope of at least 450 million cubic feet;

b. Another $175 million will be paid pursuant to signing of binding long-term agreements (If to be signed and providing the main suspending conditions are fulfilled) for the supply of gas from a Non-LNG Export Project, which include an undertaking to purchase natural gas in an average daily quantity of at least 700 million cubic feet or in the case of actual supply of natural gas from a Non-LNG Export Project at an average daily scope of at least 900 million cubic feet;

3.3. A payment at the rate of 5.75% of Woodside's income from the sale of natural gas for export (calculated according to the value at the well bore) of above 2TCF, up to a ceiling of U.S. $1.3 billion (Each Partnership's share in the said payment is approx. $298 million).

3.4. Royalties payments at the rate of 2.5% of Woodside's income from the sale of petroleum, if found, in the deeper layers within the licenses area. Royalties payments shall commence after the date of repayment of Woodside's investment from a petroleum exploration and production project within the deeper layers in the licenses area. Royalties are calculated in accordance to the prices at the well bore less royalties to the state and taxation by the State in accordance to Petroleum Profits Tax Law – 2011.

3.5.  A one-time payment in the sum of $50 million (Each Partnership's share in the said payment is approx. $11.46 million) will be made if evaluation of the contingent resources and reserves (2P or 2C) of the Leviathan Project, in the resources report which will be published by an external evaluator, which shall be carried out after actual production of 4TCF from the project, is higher than 20 TCF (Including the natural Gas produced until date of evaluation).

4. The Leviathan Partners and Woodside agree that for purposes of financing the establishment costs of the Leviathan Project, they will work together in a reasonable manner to examine all potential funding options in order to raise project financing (non-recourse) for the Leviathan Project.

5. The Leviathan Partners and Woodside have agreed that Woodside will serve as an Operator of any Continental Liquefaction Project (LNG) and/or FLNG Project of the Leviathan Project. 

6. The Binding Agreement (if to be signed) shall take effect subject, inter alia, to receipt of all of the regulatory approvals required by law, including approvals from the Petroleum Commissioner, the Antitrust Authority as well as for the making of amendments to the Joint Operation Agreement (JOA) of the Leviathan Project.

Warning regarding forward-looking information The information specified above, including with respect to the commercial conditions of the MOU, with respect to the possibility of the execution of a binding agreement for the joining of Woodside to the Leviathan Project (if to be signed),and with respect to the timetables for the execution thereof, potential for the existance of petroeum within the deeper layers  in the licenses area, constitutes forward-looking information, within the meaning thereof in the Securities Law - 1968, in respect of which there is no certainty that it will materialize, in whole or in part, in the manner stated or in any other manner, and may materialize in a materially different manner, and specifically there is no certainty that a binding agreement will be signed, under the conditions stated or under other conditions. It is further noted that the execution of a binding agreement as aforesaid is subject, inter alia, to completion of negotiations and to receipt of the approval of the competent organs and the approvals required by law.

The partners in the Leviathan Project and their holding rates are as follows:


Noble

39.66%

Avner

22.67%

Delek   

22.67%

Ratio    

15.00%





If a binding agreement is signed, the holding rates of the partners in the Leviathan Project will be as follows:


Noble           

30%

Woodside    

25%

Avner      

16.93875%

Delek       

16.93875%

Ratio          

11.1225%

 

This is a convenience translation of the original HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on February 07, 2014.

About The Delek Group

The Delek Group, Israel's dominant integrated energy company, is the pioneering leader of the natural gas exploration and production activities that are transforming the Eastern Mediterranean's Levant Basin into one of the energy industry's most promising emerging regions. Having discovered Tamar and Leviathan, two of the world's largest natural gas finds since 2000, Delek and its partners are now developing a balanced, world-class portfolio of exploration, development and production assets with total gross natural gas resources discovered since 2009 of approximately 37 TCF.

In addition, Delek Group has a number of assets in downstream energy, in water desalination, and in the finance sector.

For more information on Delek Group please visit www.delek-group.com

Contact
Dalia Black / Dina Vince
Investor Relations
Delek Group
Tel: +972 9 863 8444
Email: [email protected]

SOURCE Delek Group

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