Delek Group: Decision Regarding the Drilling of the "Tamar-8" Development

OREANDA-NEWS. Delek Group (TASE: DLEKG, US ADR: DGRLY) ("the Company") hereby announces that further to the provisions of Section 1.7.4(d) of the Company's Periodic Report dated December 31, 2015, as published on March 31, 2016 (Reference no.: 2016-01-020628) ("the Periodic Report") about the planned work plan for the Tamar Project located in the area of the Tamar I/12 lease ("Tamar Project" and "Tamar Lease," respectively), the Tamar Project development plan ("the Development Plan") and development of the Tamar South-West reservoir ("Tamar SW"), the Company respectfully announces that Delek Drilling LP and Avner Oil and Gas Exploration LP (hereinafter jointly, "the Partnerships") reported that on June 30, 2016, the Tamar Partners, including the Partnerships, made a decision regarding the drilling of the "Tamar-8" development and production well and the construction of related infrastructures in the Tamar field ("Tamar-8 Well" or "the Well").

Below are additional details of the Well:

1.         The date on which the decision regarding the drilling of the Well was made: June 30, 2016. 

2.         Reasons for the decision:

A.    In light of total production from the Tamar reservoir and in light of the demand, both current and anticipated, for natural gas from the reservoir, the Well operator, Noble Energy Mediterranean Ltd. ("Noble" or "the Operator") recommended that the Partners drill the Well, in order to increase the redundancy in the production system and enable maximum supply from the Tamar reservoir during peak demand. Additionally the infrastructures required will be built in the Tamar field in order to connect the Well to the Tamar Project's existing subsea production system.

B.    Note that the Tamar-8 Well will also serve as an additional production well in the Tamar expansion project (if approved), as specified in Section 1.7.4 (d)(3) of the Periodic Report ("the Expansion Project").

C.    Development of the Tamar SW field is planned for the future, in accordance with the project's development and production plan.

3.         Conditions for the drilling of the Well and participation in its performance: The Petroleum Commissioner of the Ministry of National Infrastructures, Energy and Water Resources ("Ministry of Energy") approved the current development plan, according to which the Tamar-8 Well will be drilled and connected to the Tamar field's production system. The Tamar Partners plan on immediately promoting receipt of the remaining approvals required from the Ministry of Energy for its drilling - receipt of approval for the Environmental Impact Assessment, which was submitted in April 2016 and receipt of approval for the drilling program, which will be submitted after a decision is made regarding the rig through which the Well will be drilled. Note that the Tamar Partners are expected to approve a contract with a drilling rig in the coming weeks.

4.         Name of the Well: "Tamar-8".

5.         Location of the Well: Offshore well, approximately 100 km west of Haifa.

6.         Drilling dates: The drilling is expected to begin in the fourth quarter of 2016 and to last about four months (including completion and connection to the production system).

7.         The target layers in the Well: "Tamar sands" from the Miocene epoch.

8.         Well type, purpose and future stages dependent on the findings: A well designed to facilitate optimal production from the Tamar reservoir. The drilling of the Well, its completion and connection to the existing subsea production system of the Tamar Project are expected to be performed consecutively.

9.         Depths: The depth of the water at the drilling site is approximately 1,670 meters, and the final depth planned for the Well is approximately 5,050 meters below sea level.

10.       Budget: The total budget (100%) is USD 265 million, as follows: The cost of the Well, including the completion, is USD 160 million, while an additional amount of approximately USD 105 million is designated for the construction of related infrastructures in the Tamar Project, including development of the subsea system and connection of the Well to the existing Tamar infrastructure. Note that out of said total budget, USD 37 million is for equipment that has already been purchased for development of Tamar SW, which will be used in the Well, and therefore the total actual expense (Well, completion and related infrastructures), net of the amount for the equipment that was already purchased, as aforementioned, will reach USD 228 million.

11.       Name of operator: Noble.

12.       Name of the company drilling the Well: Noble.

13.       Share of the capital rights holders of the company in the drilling budget: 17.68%

14.       Share of the capital rights holders of the company in the possible revenues deriving from the Well: Before return on investment - 15.28%, after return on investment - 15.74%, taking into account the royalties paid to the government, related parties and others.

15.       Names of the partners in the gas asset in which the Well will be drilled and their share in the drilling budget:

16.       Reference to description of the petroleum asset in the Periodic Report: For a description of the petroleum asset, see Section 1.7.4 of the Periodic Report.

The Delek Group, Israel's dominant integrated energy company, is the pioneering leader of the natural gas exploration and production activities that are transforming the Eastern Mediterranean's Levant Basin into one of the energy industry's most promising emerging regions. Having discovered Tamar and Leviathan, two of the world's largest natural gas finds since 2000, Delek and its partners are now developing a balanced, world-class portfolio of exploration, development and production assets with total gross natural gas resources discovered since 2009 of approximately 40 TCF.