Delek Buys Back Shares as Energy Sector Calms After Egyptian Gas Find

Move seen as signaling that the stock market reacted too harshly to news of a major Egyptian gas discovery.

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Israeli gas platforms, controlled by U.S.-Israeli energy group Noble and Delek, are seen in the Mediterranean sea, some 15 miles (24 km) west of Israel's port city of Ashdod.Credit: Reuters/Amir Cohen

Delek Group said on Tuesday it bought shares in itself and its two natural gas subsidiaries in a move seen as signaling that the stock market reacted too harshly to news of a major Egyptian gas discovery.

Delek Group said it bought about 35 million shekels ($8.9 million) in shares in its Delek Drilling and Avner units, which have stakes in the Tamar and Leviathan gas fields, on Monday as the two companies’ stock was being hammered in Tel Aviv Stock Exchange trading.

Delek, which is controlled by Yitzhak Tshuva, also bought another 30 million shekels of its own shares as part of a buyback plan it announced earlier this year.

Energy shares were mostly lower on Tuesday, but there were modest declines compared to the double-digit losses they saw the day before after the Italian energy company Eni said preliminary estimates showed its Zohr field might hold 30 trillion cubic feet of gas.

Delek Drilling ended down 1.6% at 11.82 shekels and Avner posted a 0.5% gain to 2.28. Isramco, which is a partner in Tamar, fell just 0.6% to 67 agorot and Ratio, a partner in Leviathan, fell 3.8% to 26 agorot.

In New York, Noble Energy, the Texas company with stakes in both fields, was down 6.5% to $31.25 in late trading, but analysts said that came after oil prices tumbled more than 7% in volatile trading that sent Brent futures back below $50 a barrel.

Barclays analyst Tavy Rosner told Reuters the sell-off of Israeli energy shares appeared excessive, noting Leviathan’s main Egyptian customer was BG’s LNG facility, whereas much of the Egyptian gas — initially at least — would likely be for domestic consumption.

Liran Lublin, energy analyst at IBI Israel Brokerage & Investments predicted that Egypt would not be ready to export gas before 2023-24 while Leviathan’s gas could reach the LNG facility by 2019-20, he estimated. Egypt had proven reserves 2.5 times that of Israel’s even before the latest discovery.

Brenda Shaffer, an energy specialist at the University of Haifa, downplayed the importance of Egypt in the plans for developing Leviathan.

“A deal to export gas from the Leviathan reserve to Egypt was close to fruition, so nothing really happened,” she said, regarding the gas find announced by the Italian energy company Eni on Sunday.

“The Leviathan partners couldn’t have a signed agreement, with no authorization from Egypt for it and there was no certainty of any secondary market for Israeli gas, because the liquefied natural gas market is awash in American gas and prices are low,” she said.

Shaffer urged Israel to develop the domestic market by creating demand that could make use of the gas.

Reuters contributed to this report.