Avner Oil - Annual Report 2011 - Delek Energy Systems

obtaining Cypriot government approval, each of the general partners of thePartnerships will transfer all of their rights, liabilities and undertakings according to thetransfer agreement to the Partnerships.(3) On December 9, 2011, Noble Cyprus received a letter at its offices from the CypriotMinister of Commerce, Industry and Tourism (the minister in charge of the energymatters in Cyprus) with a copy to the Partnership and Delek Drilling ("the letter").According to the letter, on November 28, 2011, the Council of Ministers of theRepublic of Cyprus resolved, based on Noble's request of July 11, 2011 (and theinformation set out therein and added thereto) to partially endorse the rights in thePSC and the Block 12 exploration license (in this section: "the license"), to approveendorsement of 30% (15% to the Partnership and 15% to Delek Drilling) of therevenues which Noble is entitled to according to the PSC and from the license ("theendorsement"). According to the letter, this endorsement is subject to the followingterms: (1) Participation of the Partnership and Delek Drilling will not be as operator, asdefined in the PSC agreement and in the license; (2) all the other liabilities and rightsof Noble according to the PSC and the license will remain unchanged and NobleCyprus will continue serving as the sole operator and exclusively bear all the liabilitiesaccording to the PSC and the license. The Partnership and Noble Cyprus are takingsteps with the Cypriot authorities to complete the rights transfer process so that thePartnership will be a party to the PSC and the license.(4) Below is further information of the series of agreements(1) The transfer agreementSubsequent to obtaining all the relevant approvals, Noble Cyprus will transfer to DelekDrilling Management and Avner Oil and Gas, and each of the latter two will transfer to theeach Partnership, 15% (each) of the participation rights in the PSC (as described below)and in the the exploration license granted to Noble Cyprus according to the PSC ("thelicense"). Subject to obtaining Cypriot government approval, completion of the aforesaidtransfer and fulfillment of the obligations of the parties according to the agreement signedbetween them, the parties will sign a JOA which is similar to that signed with the generalpartner, as described below. After the transfer, the rights in the PSC and the license willbe as follows: Noble Cyprus - 70%, the Partnership - 15% and Delek Drilling - 15%. DelekDrilling Management and Avner Oil and Gas have undertaken to indemnify Noble Cyprusfor any direct damage or loss it incurs due to any misrepresentation or omission in theapplication filed with the Cypriot government for the transfer of rights to the Partnerships.This rights transfer is subject to the conditions specified in the agreement between theparties, including, inter alia, obtaining Cypriot government approval by August 1, 2013,distribution of costs incurred by Nobel for submitting the transfer application to the Cypriotgovernment as described in the agreement and producing guarantees and collateral tothe Cypriot government as required according to the PSC.The transfer agreement will expire on the earliest of the following dates: (1) Expiry of thePSC; and with respect to Delek Drilling Management and Avner Oil and Gas; (2) uponpayment for the rights transfer to each of them; or (3) on August 1, 2013. By August 1,2013, Delek Drilling Management and Avner Oil and Gas will each be entitled to transfertheir rights to any third party acceptable to Noble Cyprus, subject to approval of theCypriot authorities. It is clarified that any consideration received with respect of thetransfer agreement will be transferred to the Partnership and not to its general partner. Ifthe Cypriot government fails to approve the transfer to the Partnership and Delek Drillingor other transferees as set out above, and Noble Cyprus announces a commercialdiscovery in Block 12, each of them will be entitle to reimbursement from Noble Cyprus ofany amounts paid by them under the provisions of the transfer agreement regarding thediscovery.Delek Drilling Management and Avner Oil and Gas will each bear 15% of the amountsincurred by Nobel from the exploration operations (including drilling), evaluation,development or production and/or any operations carried out according to the PSC andwill cover their share as if they were party to the JOA. Upon transfer of the rights, thepayments that were made by the parties will be adjusted according to their share of theasset. The aforesaid agreement also stipulates that until Cypriot authorities approve therights transfer to the Partnerships, the Partnership and Delek Drilling will have no accessto any information or data regarding the operations in Block 12 which are confidentialA-179