Israeli oil and gas company Delek has received an offer from an unnamed investor for a potential investment of up to $250 million into its North Sea focused subsidiary Ithaca Energy.
Delek, which through Ithaca agreed to buy Chevron’s North Sea assets in a $2B deal in May, had in August said it was conducting negotiations with potential investors to make an equity investment in Ithaca in return for the allocation of senior shares in the parent company of Ithaca Energy Limited, for consideration of up to $300 million.
The Israeli company on Sunday said it had received a signed offer from an international trading company for an equity investment in Ithaca’s Parent Company through the purchase of $100 million in preferred shares of Ithaca’s Parent Company.
“The preferred shares carry a guaranteed dividend yield, and will automatically convert to approximately 4% of common shares at the time of Ithaca’s Parent Company’s initial public share offering, reflecting an equity value of $2.5 Billion for Ithaca Energy (pre-money). In addition, there will be an agreed adjustment mechanism to the investment linked to the actual IPO price,” Delek said.
Furthermore, Delek said the offer included entering into agreements with the unnamed investor for the marketing of oil and gas for a five years period.
“As part of this, the investor has proposed an advance payment on account of future sales, as is customary in transactions like this, which will be used to fund Ithaca’s working capital in the sum of up to $150 Million. In addition to examining the aforementioned offer received by the company, negotiations are underway with other potential investors,” Delek said.
Ithaca in July concluded its senior notes offering, raising $500 million, in connection with the acquisition of Chevron North Sea Limited (“CNSL”).
Delek has previously said it expected to complete the Chevron transaction in the fourth quarter of 2019. Israeli financial news website Globes on Sunday reported that Delek needed $450m to complete the Chevron deal. The news website said that even if the latest $250 million proposal was successfully closed, “Delek Group and Ithaca must still find $200 million more to complete the Chevron deal”
The transaction, once completed, will add a further ten producing field interests to the existing Ithaca portfolio, four of which relate to assets operated by the company, resulting in an approximately 150% increase in the proven and probable (“2P”) reserves of the company and a 300% increase in forecast 2019 production.
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