Avner Oil - Annual Report 2011 - Delek Energy Systems

AVNER OIL EXPLORATION (LIMITED PARTNERSHIP)NOTES TO THE FINANCIAL STATEMENTSNote 12 – Contingent Liabilities, Commitments, And Liens (Continued):B. The operator will be required to comply with the following terms:1. The operator of an onshore right will have experience in oil explorations, involving expenses of at least $10 millionat one onshore oil field over the last five years.2. The operator of an off shore right will have experience in the following two fields:A. Oil explorations involving expenses of at least $100 million in one offshore oil field over the last five years;B. Management and supervision of drill wells at a water depth similar to where he is to serve as operator, according tothe following breakdown: up to 500 meters, up to 1,000 meters and more than 1,000 meters. In this regard, water depthwill be taken to be the deepest part of the requested right area.C. Requests for licenses on the basis of any prior right, requests for the transfer of rights under Article 76 of thePetroleum Law, and requests for additional areas under Article 49 of the Petroleum Law - the economic strengthaccording to the relative share of each holder of a license will be considered, will require compliance with requirementsdetailed in the provisions, and submission of a letter of commitment to comply with the economic requirements. It willbe possible to prove compliance with the economic requirements through one partner to a requested right who holds10% at least.D. Requests that include an operator that is an entity registered in a foreign company, will submit duly completedquestionnaires on its foreign and trade relations, with foreign countries. These questionnaires may be obtained from theoffice of the Supervisor.4. Letter from the Supervisor of Restrictive PracticesOn September 6, 2011, the partnership received a letter from the Supervisor of Restrictive Practices stating that he isconsidering declaring the partnership, together with other partners of the "Yam Tethys" project, as a monopolist in thesupply of natural gas in Israel; and together with other partners of the "Tamar" project, as a future monopolist in thesupply of natural gas in Israel, from the second half of 2013 onwards, and to declare that the partnership is a party torestrictive practices following its acquisition (together with Delek and Noble) of joint ownership with Ratio of the"Ratio Yam" licenses. Before the Supervisor will make his decision on said matters, the partnership was given theopportunity to express its position. During March 2012, a letter was received from the Supervisor, noting that the lastdate for the partnership to express its position with the Supervisor was set for May 1, 2012.If the partnership will be declared, after the hearing, a monopolist (vis à vis the "Yam Tethys" project), it will be subjectto Chapter D of the Restrictive Trade Practices Law, and the partnership could be subject to certain restrictions on itsoperations. If said will transpire, this could have a material adverse effect on the partnership's business affairs.S. Loan From a Related Party:1. On January 9, 2012 (after reporting date) the partnership signed an agreement with Delek Energy Systems Ltd.,("Delek Energy") which was updated on March 14, 2012 (after reporting date), according to which Delek Energy willprovide the partnership with a loan of up to $10 million ("loan"), with an updated repayment date of May 25, 2012. Theloan will bear annual interest of one month LIBOR + 4.2%. The loan will be provided to the partnership without anyguarantees or collateral security. The loan will be provided to finance investments by the partnership in the "Tamar"project, the "Leviathan" project and the "Alon" license, that will be made in the near term.On February 11, 2012 (after reporting date) approval was received from income tax for withdrawal of $8 million asinterim financing for said projects.2. On February 1, 2012 (after reporting date) the partnership signed a loan agreement with Delek Energy, and DelekEnergy will provide the partnership with a loan of up to $30 million, to finance investments of the partnership in the"Tamar" project, the "Leviathan" project, and the "Ruth" and "Alon" licenses. The loan principal will bear annualinterest of one-month LIBOR +4.3%. The loan (principal and interest) will be called for repayment 70 days after beingprovided. Delek Energy will provide the loan without any security whatsoever. The loan is provided because the termsfor completing the first withdrawal from the financing agreement between the partnership and HSBC Bank PLC havenot yet been completed.-13-