Delek Drilling, a unit of Yitzhak Tshuva’s Delek Group, is in talks to sell its 22% stake in the Tamar natural gas field to Scotland’s Cairn Energy for $1.1 billion, sources close to the sale process said on Monday.
The sale comes as Delek faces an end-of-the-year deadline to sell the stake as required under the terms of the natural gas framework agreement reached between the gas monopoly and the government in 2015. Neither Delek Drilling nor Cairn responded to requests for comment.
The sources said Cairn’s offer represented a $100 million premium over its assessed value. Delek Drilling shares ended up 2.9% at 5.17 shekels ($1.55) in Tel Aviv Stock Exchange trading, capping a 40% increase over the last three months.
Cairn was awarded oil and gas exploration rights in 2019 for eight areas in Israeli economic waters in partnership with the Israeli company Ratio and the U.K.-based company Pharos Energy. A leading European independent oil and gas exploration and development companies and listed on the London Stock Exchange, Cairn is serving as the operating partner.
Originally focused on Bangladesh and India, the company has more recently entered into Africa and the Middle East. Last month, it announced it had agreed to buy 50% of a portfolio of oil and gas production, development and exploration interests from Shell in Egypt’s Western Desert for a price that could reach as much as $926 million. The other half is being acquired by Cairn’s partner company, Cheiron.
Cairn’s market cap on the LSE is about 847 million pounds ($1.2 billion). The company had $570 million in cash on its books as of the end of 2020, which means that if it does go through with the Tamar acquisition the company will have to enlist partners or raise capital. Sources told TheMarker that Cairn would likely join up with U.S. investment funds to complete the deal.
Delek Drilling is under orders to sell the Tamar stake by the middle of December as part of a government effort to ensure more competition in the natural gas industry, which is dominated today by Delek and Chevron. Cairn appears to be the most likely buyer after other prospective buyers that examined the possibility and rejected it.
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The biggest partner in the Tamar field – Israel’s second-largest after Leviathan – are the U.S. energy giant Chevron, which acquired a 25% stake from Noble Energy and is the operating partner. Other partners include the Israeli companies Isramco (28.75%), Tamar Petroleum (1675%), Dor Gas (4%) and Everest (3.5%). Delek Drilling also has a 45.3% stake in Leviathan.