Avner Oil - Annual Report 2011 - Delek Energy Systems

on the project level and the Partnership's estimate of their share in the overheads,general and administrative expenses which can be directly attributed to the project. Asrequired by the Partnership, these costs remain fixed during the life of the project. (3)The capital expenditure taken into account includes capital expenditure provided toNSAI by the Partnership and appear reasonable, based, inter alia, on the developmentplan in the Noa field and NSAI's experience in similar projects. The capital expendituretaken into account is the capital expenditure required to develop and complete wellsand production equipment. As required by the Partnership, these capital expendituresremain fixed until actually expended. (5) The abandonment costs taken into accountare costs provided to NSAI by the Partnership according to its assessments of thecost of abandoning wells, platforms and production facilities. These costs do not takeinto account the salvage value of the Noa lease and facilities in the Noa field. Asrequired by the Partnership, abandonment costs remain fixed until actually expended.(6) The tax calculations take into account corporate tax rates provided to NSAI by thePartnership, which are the expected tax rates for each of the years included in thediscounted cash flows. (7) Actual production capacity could be lower or higher thanthe production capacity used to estimate the discounted cash flows. NSAI did notprepare a sensitivity analysis for the production capacity of the wells. A sensitivityanalysis could lead to a conclusion that the reserves are not feasible for production.It is further noted that the discounted cash flow includes royalties as set out in sectionabove, and petroleum profits tax applicable to the יה לא נמצא.‏Partnership in accordance with the Taxation of Petroleum Profits Law ("the Law"). It isemphasized that calculation of the levy was based on the definitions, formulas andmechanisms set out in the law as understood and interpreted by the Partnership,however, since the law is new and the calculation formulas and mechanisms set out inthe law are complex, it is not certain whether this interpretation of the calculationmethod for the levy will be the same as that adopted by the tax authorities and/or thesame as the interpretations of the law by the court, insofar as a ruling is required onthese issues. To date, these issues have not been brought before the courts in Israel.The levy was calculated according to the transitional provisions in the law for a projectthat started commercial production before the Law came into effect, based on thefollowing assumptions: The developer will report in US dollars according to section13(B) of the law, the rate of inflation in the United States in the coming years will be2%, all of the developer's payments (production costs and investments) will berecognized by the tax authorities for calculation of the levy and calculation of thedevelopers revenues will take into account actual selling prices of the gas.שגיאה!‏ מקור ההפנFollowing is the discounted cash flows in thousands of USD (after the levy and incometax) of the Partnership from the reserves in the Noa field (the cash flow is based onassumptions, which are described above).A-34