Avner Oil - Annual Report 2011 - Delek Energy Systems

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AVNER OIL EXPLORATION (LIMITED PARTNERSHIP)NOTES TO THE FINANCIAL STATEMENTSNote 9 – Banks (Continued):To receive the loan, the partnership has set up a "special-purpose" company – Avner Explorations (LeviathanFinancing) Ltd. ("special purpose company"). According to the financing agreement, the loan will be issued to the"special purpose company" and will be issued "back to back" to the partnership. To secure repayment of the loan, thepartnership will record a lien on its rights to "Leviathan" project properties, primarily as follows: rights to the "Amit"and "Rachel" licenses ("licenses"), rights to the "Leviathan" project's joint operating agreement ("JOA"), shares of the"special purpose company" and ancillary properties and agreements of the "Leviathan" project (such as insurancepolicies). The loan is nonrecourse, and the lenders have no right of recourse against partnership properties that have notbeen liened in their favor. It should be noted that said liens, are subject to the State's royalty rights, and to the royaltyrights of other parties entitled to receive royalties from the partnership (including interested parties). In order to createlegal certainty regarding the order of creditors as stated above, in the event of any default by the partnership, thefinancing documents also provided, at the request of the bank, that liens on the licenses would be recorded in favor ofsaid other royalty recipients, over the financing agreement period, so as to secure their rights to royalties.Common with financing agreements of this type, the partnership has accepted various covenants, including inter alia,the following main obligations: limitations on taking other credits (these limitations will not be binding on anynonrecourse credits, and credits of up to $20 million); compliance with the relationship between reservoirs and debtbalances; limitations on changes in operations; limitations on the transfer of partnership control; limitations on signingcontracts which could have a material adverse effect; protection of properties that are liened, and abstention frombreach or change of terms of significant agreements including, not to vote on the basis of the joint operating agreement,in a manner that could have a material adverse effect on the ability of the partnership to comply with its significantobligations vis à vis the financing agreement; the purchase of insurance policies in accordance with provisions of thejoint operating agreement; terms for the purchase of additional rights to the "Leviathan" project; limitations on approvalof sole risk steps vis à vis the "Leviathan" project, etc.Common with financing agreements of this type, the financing agreement defined various default events, which if theytranspire (and subject to remedial periods as provided by the financing agreement,) the financing bank would have theright to call the loan for immediate repayment, including, inter alia the following main events: nonpayment of amountsdue the lenders; a breach of covenants; a breach of presentations; default; events that that could have a material adverseeffect on the ability of the partnership to comply with its significant obligations vis à vis the financing agreement or the"Leviathan" project; events that could have a material adverse effect on the partnership's main properties, transactionsor financial position; events that could have an effect on the partnership's ability to sell the "Leviathan" project in amanner that would enable it to repay the loan when due; cancellation or inability to receive significant approvalrequired for the "Leviathan" project; repeated "force majeure" events relating to the "Leviathan" project, etc.Concurrent with signing the financing agreement, the partnership appointed the financing bank sole consultant andcoordinator of the long-term loan (which will replace, inter alia, the loan which is the subject of this report) and grantedit the right to provide various services (whether alone or with the cooperation of other banks) vis a vis the "Leviathan"project.The partnership has asked for approval of the Israel Tax Authority to accept the loan and if necessary, will ask for anexemption from any tax to be deducted at source from the foreign lenders. If said exemption will not be granted, thepartnership will gross up the tax deduction at source, according to the domiciles of the foreign lenders, as will be, if atall, when the interest is paid.2. On February 27, 2012 (after reporting date) the partnership received notice from the Supervisor, that after consultingwith the Oil Council, he had decided to approve the request by the partnership for a lien, in accordance with the lienagreement, on the rights of the partnership in accordance with licenses for the exploration and extraction of oil andnatural gas on the basis of rights to "Rachel" and "Amit" licenses, in favor of HSBC to secure credits that will beprovided to a company fully owned by the partnership, for its operations on the basis of rights to "Rachel" and/or"Amit" . In addition, the partnership will also be entitled to use the credits to finance investments in the "Yam Tethys"project, drillings at the satellite reservoirs of the "Mari B" reservoir in the 1/10 "Ashkelon" holding should thepartnership decide on said, the development of the "Noa North" field in the 1/7 "Noa" holding, and to financeoperations at the 1/12 "Tamar" holding. The approval of the Supervisor was issued subject to certain terms andclarifications as provided, including compliance with terms for the first withdrawal of loan funds from the projectfinancing, and that no other funds would be drawn from the loan, which is secured by liens on the licenses forinvestments in the "Tamar" project, except in the event of any unexpected budget overrun vis à vis the "Tamar" project,and after receipt of approval by the Supervisor.-11-
AVNER OIL EXPLORATION (LIMITED PARTNERSHIP)NOTES TO THE FINANCIAL STATEMENTSNote 10 - Bonds:A. On March 9, 2005, the project financing phase was finalized under which Delek and Avner Yam Tethys Ltd.,("SPC"), issued, to institutional investors in the United States, under Rule 144A, $275 million of bonds ("bonds"), ofwhich - $175 million at a fixed interest rate of 5.326% per year and $100 million at a variable interest rate of threemonthsLIBOR plus a margin of 1.1% per year. The bonds were issued on the basis of the respective shares of theDelek Drilling, Delek Investment and Properties Ltd., and the partnership ("Israeli partners") of cash flows that will begenerated from the sale of natural gas to Israel Electric under a contract dated June 2002. The capital was provided asseparate financing to the limited partnership, to Delek Drilling and to Delek Investments at the same terms as the bondsissue.The bonds original repayment date was up to August 1, 2013 (see paragraph B regarding an early retirement of thebonds)..B. Decision On The Early Retirement Of Bonds:On March 31, 2011, the Israeli partners of the "Yam Tethys" project announced the early retirement of bonds, whichwere originally issued by Delek and Avner Yam Tethys Ltd., a special purpose subsidiary company ("SPC").Said notice was announced by the SPC, based on a right that it received under the bond terms, and accordingly, thebalance of bonds was repaid at the beginning of May 2011. The objective of the early retirement was to enable, interalia, the Limited Partnership to take steps to receive new financing, backed by expected revenue flows from the "YamTethys" project.C. Breakdown:December 31,1122 1121US $ ThousandsBonds, at fixed interest rates - 12611,Bonds, at variable interest rates - 36253Less - current maturities - 116512- 256315- 216,31Balances of bonds and current maturities are after issue expenses of $ 297 thousand.Note 11 - Other Payables:December 31,1122 1121US $ ThousandsAccrued bank interest 111 -Related parties (note 23 A) 56135 16111Accrued bond interest - 113Accrued expenses and other payables 56336 56261Accrued expenses - joint ventures 156531 35611,Operator – explorations in Cyprus 16311 -Accrued expenses - other joint ventures 512 211636,32 366365-19-
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All English versions / translation
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2.5 Map of the Limited Partnership'
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351/Hannah, 352/David and 353/Eran
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Law), which sets out provisions for
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(D)(E)(F)(G)(H)(I)(J)(K)(L)(M)Exami
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The Natural Gas Sector Law and its
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Description of the Partnership's oi
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The main terms of the leases in the
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Noa leasePeriodSummary of the opera
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7.3.7 Calculation of the effective
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the oil asset (before other payment
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DescriptionBudget actually invested
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have not been brought before the co
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Salesquantity(BCM)(100% of theoil a
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Salesquantity(BCM)(100% of theoil a
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(4) Production dataThe following ta
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on the project level and the Partne
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Sensitivity analysis for the main p
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(3) Basic parameters used to calcul
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7.4 Tamar project7.4.1 GeneralTamar
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7.4.2 Main terms of the I/12 Tamar
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(C)If the Commissioner postpones or
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(F)(G)(H)(I)(J)(K)(1) The leasehold
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7.4.5 Actual work plan and intended
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PeriodDalit leaseSummary of the ope
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Dalit leaseParticipation rate %Perc
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DescriptionEffective share attribut
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7.4.9 Royalties and payments paid d
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expenses which can be directly attr
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Total discounted cash flow from pro
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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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7.7.3 Binding work plan according t
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7.7.5 Disclosure of the effective p
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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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Page 224 and 225: AVNER OIL EXPLORATION (LIMITED PART
Page 226 and 227: Auditors' Report to the Partners of
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Page 249 and 250: Untimely Meditationshad only you, t
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Page 309 and 310: Regulation 10A: Summary of the Part
Page 311 and 312: Regulation 12:Regulation 13:Regulat
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Page 315 and 316: Regulation 24:will not be able to d
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Page 319 and 320: 10. Occupation in the past five yea
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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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