Delek Offering to Buy $2 Billion of North Sea Gas Fields From Chevron

Move comes just weeks after Israeli company bought Gulf of Mexico field

The foundation platform of Leviathan natural gas field, off the coast of Haifa, January 31, 2019.
\ POOL New/ REUTERS

Delek Group said on Sunday it had submitted a proposal through its Ithaca unit to buy Chevron’s oil and gas fields in the British North Sea as the Israeli holding company expands its overseas energy business and eyes a London Stock Exchange listing.

Delek said in a filing with the Tel Aviv Stock Exchange that the discussions centered on Chevron’s Alba, Alder and Britannia and satellites as well as Captain, Elgin/Franklin, Erskine and Jade gas fields.

It did not provide any financial details, but sources told Reuters last week that the company would pay between $1.8 billion and $2 billion for the assets which exclude Chevron’s 19.4% stake in the BP-operated Clair field.

Delek shares rose 0.6% at 691 shekels ($190.84) in TASE trading.

The company, which termed the Chevron deal part of its strategy to expand its international operations, said it believed that if a final agreement is reached, it could be completed this year. It said the purchase would be financed through bank loans and its own resources.

The Chevron deal comes on the heels of Delek’s acquiring Shell’s 22.45% stake in the Caesar-Tonga field in the U.S. Gulf of Mexico for $965 million earlier this month. Controlled by Yitzhak Tshuva, Delek has stakes in Israel’s Leviathan and Tamar gas fields as well as in the Aphrodite field offshore Cyprus, making it Israel’s biggest energy company. It acquired 100% of Ithaca, an oil and gas operator focused on the North Sea, two years ago.

U.S. oil major Chevron kicked off the sale of its central North Sea oil and gas fields last July, with the help of U.S. investment bank Morgan Stanley.

Sources told Reuters last week that the Israeli company beat competitors, including a consortium formed by Britain’s Premier Oil and U.S. private equity fund Apollo Global Management, and also British petrochemical maker Ineos Group.

The deal would be just the latest of many that have transformed the population of North Sea producers over the past five years.

Under pressure from a fall in oil prices to near 14-year lows of $26 a barrel in 2016, major oil and gas companies have been forced to sell assets to private equity-backed investors and specialized operators.

Funds including Neptune, backed by Carlyle Group and CVC Capital Partners, and Chrysaor, backed by EIG Global Partners, among others, have since raised billions of dollars to snap up what they see as bargains in the sector.

Chevron, which produced 50,000 barrels of liquids and 155 million cubic feet of natural gas per day on average in 2017, is looking to 0free up cash for longer-term, higher-margin businesses in the United States.

Earlier this month, it made a $33 billion bid in cash and stock to buy Anadarko Petroleum and bolster its position in shale oil and the liquid natural gas market, which was, however, rivaled last Wednesday by Occidental Petroleum.