Avner Oil - Annual Report 2011 - Delek Energy Systems

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In recent years, there has been a significant rise in the prices of metals, which are a vitalcomponent in exploration and development costs. In addition, the increase in oil prices in recentyears led to a sharp increase in demand for service providers in the oil sector, leading to asignificant increase in operating costs in the sector and to reduced availability of contractors andrequired equipment. For further information, see section ‎7.18 below.7.1.8 Entry and exit barriers(A)(B)Israel:The major entry barriers in the exploration sector are the permits and licenses required for oiland natural gas exploration and production, compliance with financial covenants and criteriaset by the Petroleum Commissioner to the transfer or acquisition of participation rights in oilassets, including proof of financial stability required to obtain them, as well as majorinvestments at relatively high risk levels involved in these operations. There are nosignificant exit barriers in the sector, other than long-term agreements for the supply of gascontracted by the Partnership as well as the obligation to dismantle production facilitiesbefore abandoning lease areas.At the date of the report, the Ministry of Energy is preparing draft regulations, setting morestringent terms for receiving, pledging and transferring rights in oil assets in accordance withthe Petroleum Law. These regulations could constitute a material entry and exit barrier in thearea of operations. For further information, see section ‎7.23.3(C) below.Operations in CyprusThe major entry barriers in the exploration sector in Cyprus are the permits and licensesrequired for oil and natural gas exploration and production (which are granted on the basis ofa tender), compliance with guidelines and criteria prescribed by laws and arrangementsunder a production sharing contract for transfer and/or acquisition of participation rights in oilassets, including proof of financial stability and the relevant capabilities required to obtainthem, as well as heavy investments at relatively high risk levels involved in these operations.There are no material exit barriers in the area of operations, other than the conditions set outin the PSC for transfer of rights to third parties.7.1.9 Substitutes for products of the operating sectorNatural gas and oil are used as fuels for combustion and are sold to electricity producers and bothindustrial and private customers. The Partnership sells natural gas in Israel mainly to Israel ElectricCorporation, electricity producers and other industrial customers as set out in sections ‎7.11.1to ‎7.11.3 below. Natural gas substitutes include diesel fuel, fuel oil, coal, hydro-electric energy,solar energy, wind energy and biofuel. Each of the above substitutes has advantages anddisadvantages and is subject to price fluctuations. The transition from use of one energy source toanother usually requires considerable investment. The major advantages of natural gas over coaland liquid fuels are high efficiency and relatively low air pollution, and in the case of liquid fuels, alower price.7.1.10 Structure of competition in the sectorFor a description of the competition in the natural gas sector, see section ‎7.14 below.7.2 Operations of the PartnershipAs described above, the Limited Partnership carries out exploration, development and productionoperations for oil and gas in Israel and Cyprus. In this context, the Partnership operates underlicenses and leases in Israel and a license in Cyprus. Most of the Partnership’s operations focus onsupplying natural gas from the Ashkelon lease ("the Mari B reservoir) in the Yam Tethys project,developing the Tamar and Noa gas reservoirs, exploration and development of the satellitereservoirs of the Mari B reservoir ("the Pinnacles"), appraisal at the Leviathan reservoir, explorationin the territorial waters of Cyprus and exploration in areas covered by licenses in which thePartnership owns.A-13
Description of the Partnership's oil assets7.3 Yam Tethys project7.3.1 GeneralAshkelon leaseGeneral information about the oil assetName of oil asset I/10 Ashkelon 10LocationAreaType of oil asset and description of permittedoperations according to that typeApproximately 25 km west off the Ashkelon coastApproximately 250 sq. mOriginal grant date of the oil asset June 11, 2002Original expiry date of the oil asset June 10, 2032Decision date for extension of the term of the oilassetCurrent expiry date of the oil asset June 10, 2032Note whether there is an additional option ofextending the period of the oil asset: if there issuch an option, note the period of the possibleextensionNote name of operatorNames of the direct partners in the oil asset andtheir direct share in the oil asset and, to the best ofthe Partnership's knowledge, the names of thecontrolling shareholders in the partnersLeaseOperations permitted under the Petroleum Law -exploration and production-Subject to the Petroleum Law for an additional 20yearsNoble(1) Noble (47.059%); to the best of thePartnership's knowledge, Noble is a wholly ownedsubsidiary of Noble Energy Inc. ( "Noble"), a publiccompany traded on the NYSE"). According toNoble's reports, there is no shareholder holdingmore than 10% of its issued share capital.(2) The Partnership (23%)(3) Delek Drilling (25.5) 11 ; to the best of thePartnership's knowledge, the general partner inDelek Drilling, Delek Drilling Management (1993)Ltd. is a private company owned by Delek Energy,a public company controlled by Delek Group (thecontrolling shareholder being Yitzhak Tshuva).(4) Delek Investments (4.441%); to the best of thePartnership's knowledge is a private companywholly owned by Delek Group (the controllingshareholder being Yitzhak Sharon (Tshuva).Ashkelon leaseGeneral information about the Partnership's share in the oil assetAcquisition date of the lease for the acquired oil asset -Description of the Partnership's holding in the oilassetEffective share of oil asset revenues attributable toequity holders of the PartnershipTotal share of equity holders of the Partnership inthe cumulative investment in the oil asset in thefive years preceding the last day of the reportingThe Partnership owns directly 23% of the lease.19.14%USD 72,012 thousand 12101112The Mari-B gas reservoir was discovered in the area covered by the Ashkelon lease in February 2000At February 29, 2012, the participation units issued by Delek Drilling Trusts Ltd. (the limited partner in Delek Drilling),are held, inter alia, by Delek Energy Systems Ltd. (50.11%), Delek Group Ltd. (6.53%), and Delek DrillingManagement (1993) Ltd. (the general partner in Delek Drilling) (12.52%).This amount includes USD 2,407 thousand for a provision for future dismantling costs of production infrastructure.A-14
Page 4: All English versions / translation
Page 7 and 8: 2.5 Map of the Limited Partnership'
Page 9 and 10: 351/Hannah, 352/David and 353/Eran
Page 11 and 12: Law), which sets out provisions for
Page 13 and 14: (D)(E)(F)(G)(H)(I)(J)(K)(L)(M)Exami
Page 15: The Natural Gas Sector Law and its
Page 19 and 20: The main terms of the leases in the
Page 21 and 22: Noa leasePeriodSummary of the opera
Page 23 and 24: 7.3.7 Calculation of the effective
Page 25 and 26: the oil asset (before other payment
Page 27 and 28: DescriptionBudget actually invested
Page 29 and 30: have not been brought before the co
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Page 44 and 45: 7.4 Tamar project7.4.1 GeneralTamar
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Page 50 and 51: (F)(G)(H)(I)(J)(K)(1) The leasehold
Page 52 and 53: 7.4.5 Actual work plan and intended
Page 54 and 55: PeriodDalit leaseSummary of the ope
Page 56 and 57: Dalit leaseParticipation rate %Perc
Page 58 and 59: DescriptionEffective share attribut
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Total discounted cash flow from pro
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Total discounted cash flow from pos
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Sensitivity/categoryTotalPresentval
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Contingent resources in the Dalit l
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ParameterPorosity (decimal)Lowestim
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7.5 Ratio Yam licenses7.5.1 General
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The following are the planned activ
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PeriodEran licenseDescription of th
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PeriodAmit licenseSummary of the op
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Hannah licensePeriodSummary of the
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PeriodEran licenseSummary of the op
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7.5.7 Calculation of the effective
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(B)(C)(D)(E)B. A statistical progra
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7.5.10 Prospective resources in the
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ParameterLower-Oligocene(%)Mid-Cret
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(D)(E)(F)(G)(4) The contingent reso
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7.5.12 Prospective resources in the
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PeriodDescription of the updated wo
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Description%Summary of the calculat
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7.6.8 Royalties and payments paid d
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7.7.3 Binding work plan according t
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7.7.5 Disclosure of the effective p
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7.7.8 Royalties and payments paid d
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General information about the Partn
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PeriodDescription of the updated wo
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Description %Summary of the calcula
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7.8.10 Royalties and payments paid
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(B)(C)The report was based on the r
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7.9 Petroleum licenses that were re
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7.10 Products and servicesDuring th
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7.11.3 Agreements to sell natural g
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At the signing date of the letter o
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(G)addition, Yam Tethys partners ha
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(B)(13) Breach and damages: Accordi
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(D)Agreement to sell natural gas to
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(4) The gas price stipulated in the
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energy market is characterized by h
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7.20 Financing7.20.1 General(A)(B)(
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The dollar-denominated loan bears a
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tests 157 ; compliance with the res
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(E)financing agreement; purchase of
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(C)Tamar financing agreementFinanci
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As set out above, under licenses an
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(C) Petroleum Regulations (Principl
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The gas facilities that the license
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(2) Without derogating from the gen
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B. The operator of an offshore righ
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subsection (4) below exist (conditi
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Furthermore, the draft regulations
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(D)(E)(F)(G)(H)(I)(J)months after c
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(N)(O)(9) If a revised assessment i
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# Assumption Details and explanatio
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7.24 AntitrustOn October 12, 2000,
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(C)For expenses associated with dev
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(F)(G)(H)committee of the joint ven
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(L)(M)(N)(O)accumulated according t
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(D)(E)Subject to the terms of the o
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(I)(J)committee meetings, and will
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obtaining Cypriot government approv
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(5) It is noted that under Regulati
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Contingent agreements for the sale
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had not yet been received, although
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Liquefaction (LNG) The Partnership
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7.30 Risk factorsOil and gas explor
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in deviations in the budget (expect
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process for transferring the rights
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GlossaryAppraisal well: a drilling
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Avner Oil Exploration Limited Partn
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The effects of the increase in sale
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USD 6.5 million, as noted above. In
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investment in development of the Ta
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marine areas on the Cyprus continen
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Part II: Market Risks - Exposure an
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As collateral for the Partnership's
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3. Independent directorsThe Compani
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5. External auditors' feesThe amoun
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4) Accepting a financial liability
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Project cash flow (in USD millions)
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AVNER OIL EXPLORATION (LIMITED PART
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Auditors' Report to the Partners of
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Avner Oil Explorations - Limited Pa
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Untimely Meditationshad only you, t
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Regulation 10A: Summary of the Part
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Regulation 12:Regulation 13:Regulat
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C. Interested parties in the Partne
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Regulation 24:will not be able to d
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Regulation 24B: Holders of the Part
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10. Occupation in the past five yea
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9. Education: LLB, Tel Aviv Univers
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Ronen Edward (ID 024652745)1. Date
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executive liability insurance, base
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Avner Oil Exploration - Limited Par
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Declaration of the CFO based on Reg
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Avner Oil - Annual Report 2011 - Delek Energy Systems

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