Delek Group: Letter of Intent to Export Natural Gas from the Leviathan Project for Consumers in Egypt

OREANDA-NEWS. November 26, 2015. Delek Group (TASE: DLEKG, US ADR: DGRLY) (“the Company”) announces that attached is an  Immediate Report just published by Avner Oil Exploration Limited Partnerships   and Delek Drilling Limited Partnerships ("the  Partnerships") concerning a Letter of Intent for the export of  natural gas from the Leviathan Project to Egyptian consumers.

Pursuant to what was stated  in section 7.14.2 of the Partnerships' Periodic Report to December 31, 2014 that  was published on March 18, 2015 (ref. no. 2015-01-054505, 2015-01-054526)  ("the Periodic Report") in respect of contacts and/or negotiations  between the Leviathan project partners including the Partnerships ("the  Leviathan Partners") with various parties in respect of exporting natural  gas from the Leviathan Project, the Partnerships announce as follows:

On  November 24, 2015 a non-binding letter of intent was signed between the  Leviathan Partners and Dolphinus Holdings Limited ("Letter of Intent"  and "the Buyer", respectively), in which the parties confirmed their  intention to carry out negotiations on an agreement for the supply of natural  gas ("the Binding Agreement") from the Leviathan Project to the Buyer  using the existing gas pipeline operated by East Mediterranean Gas Limited ("EMG").

The  Letter of Intent includes several commercial conditions for the proposed  potential transaction, which will serve as a basis for negotiating the Binding  Agreement. The  estimated scope of the Binding Agreement is the supply of 4 BCM (billion cubic  meters) per annum for a period of 10-15 years. The  parties' intention is that the natural gas be transported using the  transmission system of Israel Natural Gas Lines Ltd  ("Natgaz") to Ashkelon and from  there to the local market in Egypt using the existing pipeline operated by EMG.

The price of gas  that is set in the Letter of Intent is similar to the prices set in other  agreements for the export of gas from Israel to regional markets and is  essentially based on a formula that includes   linkage to the price of a barrel of Brent oil and includes a "floor  price".

According  to the Letter of Intent, the Binding Agreement (if it will be signed) will be  subject to several contingent conditions, including approval of the development  plan for the Leviathan field and final investment decision (FID) by the Leviathan  Partners, signing of a transmission agreement between the Leviathan Partners  and Natgaz,signing of a transmission agreement between the Buyer and EMG that  will facilitate the transmission of gas to Egypt using the EMG pipeline,  receipt of the approvals required from the authorities in Israel including the  required approvals according to the Anti Trust Law, and receipt of the  approvals required from the authorities in Egypt. It is stipulated that the  Letter of Intent is not binding and the transaction described above shall be  subject to completion of negotiations between the parties and signing of the  Binding Agreement.

To  the best of the Partnerships' knowledge, the Buyer represents a consortium of  major Egyptian non-governmental industrial and commercial gas consumers, gas  distributors and entrepreneurs.

It  should be noted that the Binding Agreement, if it is signed, is in addition to  the supply agreement signed between the Buyer and the Tamar Project partners,  including the Partnerships, as stated in section 7.13.5(A)(3) of the Periodic  Report.

It  is also stipulated that the above Letter of Intent and the Binding Agreement  (if signed) are in addition to the negotiations of the Leviathan Partners with  BG International Limited and National Electric Power Company Limited as stated  in section 7.13.5(B) of the Periodic Report, and that the parties are working  to complete the negotiations and to formulate binding agreements.

Disclaimer  concerning forward looking information - the information  stated above concerning the possible signing of the Binding Agreement, the  terms of the Binding Agreement and the quantities of natural gas likely to be  included in it, are forward looking information in the meaning of the term in  section 32a of the Securities Law, 1968, for which there can be no certainty  that it will take place, in whole or in part, in the manner stated or in any  other manner, and it may take place in a manner materially different from what  is described above, and in particular there can be no certainty that the  parties shall reach agreement on the terms of the Binding Agreement, that the  Binding Agreement shall be signed according to the terms stipulated above or  according to other terms, and there can be no certainty that all the contingent  terms that shall be set in the Binding Agreement, if it shall be signed, will  be fulfilled.

Partners in the Leviathan Project and their percentage  holdings are as follows:

This is a convenience translation of the original HEBREW immediate  report issued to the Tel Aviv Stock Exchange by the Compnay on November 25, 2015.