Delek’s Ithaca Energy unit to acquire Chevron’s Central North Sea assets

Yaacov Benmeleh and Kelly Gilblom May 30, 2019

TEL AVIV (Bloomberg) -- Delek Group Ltd., the energy company controlled by Israeli billionaire Yitzhak Tshuva, agreed to buy North Sea oil and gas fields from Chevron Corp. for about $2 billion, the latest deal in a region where smaller players are becoming increasingly prominent.

The purchase is part of the Israeli company’s strategy to expand beyond its domestic market and roots as a financial group into an energy business with operational knowledge. The North Sea, a prolific but aging producing region, offers that opportunity, with giants like Chevron and ConocoPhillips selling out as they focus on more profitable output in the U.S.

Delek’s Ithaca Energy unit will acquire Chevron’s Central North Sea assets, including the Alba, Alder and Erskine fields as well as the Britannia, Elgin/Franklin and Jade non-operated projects, Ithaca said Thursday. Chevron’s stake in the BP Plc-operated Clair venture isn’t included in the deal.

“We can’t wait to get our hands on the steering wheel and really take it forward,” Ithaca Chief Executive Officer Les Thomas said in a phone interview. “It makes us one of the largest producers in the UK sector and we think of just lots of potential.”

Delek will gain about 500 people from the purchase, about 200 of whom help operate the fields. The company has been seeking skilled workers to transform from a conglomerate with holdings in real estate and insurance into an international oil and gas company. It has been selling non-core businesses over the past few years and snapping up energy assets in the UK and Canada.

Delek rose as much as 3.4%, the most in more than a week, and traded 3% higher at 646.70 shekels at 12:12 p.m. in Tel Aviv.

Production jump

Ithaca forecasts the deal to boost 2019 production 300% and result in a 150% increase in proved and probable reserves. To help pay for it, the company will draw on a $1.65-billion bank loan, a separate $700 million bridge loan and $350 million in cash from the acquired company, Chevron North Sea Ltd.

There’s likely to be more drilling to increase production once the deal is completed. Thomas sees “significant upside” particularly in the Captain field, 90 mi northeast of Aberdeen, Scotland. Chevron has trialed different methods to raise output there since 2010, focusing on injecting polymers into horizontal wells under the seabed, according to the company’s website.

Ithaca will also enjoy a cash-flow boost, aided by $2.2 billion in tax allowances, meaning the company will be able to offset payouts.

Delek, which bought UK-based Ithaca in 2017, began studying a possible initial public offering in London after it discovered Israel’s largest natural-gas reservoirs. It said Thursday that it plans to list Ithaca’s shares in London, and forecast the unit’s annual earnings before interest, taxes, depreciation and amortization at $1 billion.

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