Australia’s Woodside buying 30% of Leviathan for $2.5b

From Globes

The deal values the Leviathan natural gas reserve at $8.3 billion. It was first reported by “Globes”.

By Amiram Barkat and Hillel Koren

As first reported by “Globes”, Australian company Woodside Petroleum (ASX: WPL) is buying 30% of the rights in the Leviathan reserve for $2.5 billion, and it will be a strategic partner in the drilling. The details of the buyer and the expected price were first revealed in “Globes”.

News of the deal has boosted prices of the participation units of the Leviathan partners on the Tel Aviv Stock Exchange. Ratio Oil Exploration (1992) LP (TASE:RATI.L) is up 13%.

Under the terms of the deal, which has been agreed in principle, Delek Group Ltd. (TASE: DLEKG), controlled by Ytitzhak Tshuva, will sell 15% of the rights in the licenses for $1.281 billion. Noble Energy will sell 9.66% of the rights in the license for $802 million, and Ratio will sell 5% of the rights for $417 million. The consideration will be paid in stages. On the signing of the deal, Woodside will make an advance payment of $696 million.

The deal values the Leviathan natural gas reserve at $8.3 billion.

Woodside is the largest operator of oil and gas production in Australia. It will be the operator of any LNG development of the Leviathan field, while Noble Energy will remain upstream operator. Noble Energy targets initial production to the domestic gas market in 2016. A pre-FEED (front-end engineering and design) assessment for an LNG project is underway.

Woodside CEO Peter Coleman said the agreement was a significant step towards realizing Woodside’s ambition to secure world-class growth opportunities.

“We have a proven track record of safe and reliable operations in Australia and being selected as the Leviathan Joint Venture’s preferred partner in a competitive bidding process demonstrates the value of our LNG development capabilities,” Mr Coleman said.

“Acquiring an interest in these permits is an exciting opportunity to grow our portfolio in the emerging Eastern Mediterranean basin and we look forward to finalizing the agreement.”

Woodside has offered the following contingent payments: a payment of $200 million once laws permitting LNG export from Israel are in force; a payment of $350 million on a final investment decision in relation to an LNG development; potential annual LNG revenue sharing payments equal to 11.5% of Woodside’s incremental revenue above an agreed escalating price threshold, over the life of the project (capped at $1 billion); carry of expenditure up to $50 million in relation to costs associated with the drilling of a deep oil exploration well targeted for late 2013.

Woodside cautions that the agreement is subject to a number of conditions, including execution of fully termed agreements, completion of confirmatory due diligence and obtaining the necessary government and regulatory approvals.

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