Avner Oil - Annual Report 2011 - Delek Energy Systems

AVNER OIL EXPLORATION (LIMITED PARTNERSHIP)NOTES TO THE FINANCIAL STATEMENTSNote 7 – Net Investments in Oil and Gas Properties (Continued):E. "Alon" Joint Venture ("Joint Venture"):The joint venture is a joint venture for oil and gas explorations between the participants. The breakdown of the jointventure as at December 31, 2011 is as follows:Noble Energy Mediterranean Ltd. * 1301,The partnership 1,013Delek Drillings- Limited Partnership 1,013%* Noble is operator of the joint venture.211.001. Participants of the joint venture jointly hold six oil licenses – "Alon" A, B., C., D., E., and F, covering anoverall area of 2,318 square km located some 50-140 km northwest of Nahariya. The licenses were grantedup to March 1, 2009, and except for "Alon" E, their validity was extended up to September 1, 2013.See paragraph H regarding conditional agreements for the transfer of rights to "Alon" E, which if concluded,the holdings of the partnership of the license will be reduced to 12.5%.2. "Tannin 1" Drilling - 364/"Alon A" License:On August 30, 2011, the partnership decided to approve an exploratory drilling at "Tannin 1," located in the 364/"AlonA" license area. "Tannin 1" is located 120 km northwest off Haifa, in 1,770 meters of water. The overall budget of thedrilling (two stages without extraction tests) is estimated at $50 million.The main target of the "Tannin 1" drilling is the gas prospect located in the Lower Miocene and Upper Oligocene layers(parallel to layers identified in the "Tamar Sands" layers, known as NG10), at an overall depth of 5,472 meters(including water depth). On the basis of the drilling findings, decisions will be made whether and how the extractiontests will be made in the future. The availability of natural gas at the target layers may lead to additional drillings in thelicense area.During December 2011, drilling work began at the "Tannin 1" drilling site. On February 5, 2012 (after reporting date)the partners announced, on the basis of information provided by Noble, that the "Tannin 1" drilling had reached a finaldepth of 5,500 meters (including water depth). The partners decided that the drilling had shown significant signs ofpetroleum (natural gas), this on the basis of Noble's reports, based on tests that they made during the drilling work.On February 7, 2012 (after reporting date) the partners announced that Noble had made drilling tests, including loggingwhile drilling, that included electrical and Gamma Ray tests, as well as preliminary tests of the composition of thenatural gas and the rock samples at the reservoir, the results of which, as provided by the operator, satisfied the partnersvis à vis the existence of natural gas at the drilling site.The operator informed the partnership that in its opinion, the volume of natural gas at the drilling site, justified anexamination and estimate of the volume of overall resources of natural gas at the reservoir, and an examination andestimate of the volume of natural gas that can be economically extracted. Accordingly, "Tannin 1" is considered anatural gas commercial discovery. "Tannin 1" drilling costs as at December 31 2011, totaled $ 37 million – partnership'sshare - $ 9.5 million.-31-