Israel’s Delek Group has said that its subsidiary Ithaca Energy has made a deal with an investment firm to set up a new infrastructure company for Ithaca’s North Sea operations.
Ithaca in November 2019 bought Chevron’s North Sea assets in a deal worth around $2 billion. Earlier this year, Ithaca said it was exploring options to optimize its capital structure, including a potential initial public offering (IPO).
In a statement on Monday, Delek said that on February 6, 2020, a non-binding letter of intent was signed between Ithaca Energy and a global investment company on behalf of its own account and on behalf of the funds it manages. In the letter, the parties confirmed their intention to enter into a transaction to set up a new infrastructure company that would be held 40% by Ithaca and 60% by the buyer.
According to Delek, the new infrastructure company will buy from Ithaca, as part of a sale and charter agreement, part of Ithaca’s production facilities. This includes the fully-owned floating production facility FPF-1 proximate to the Stella field, and the floating production, storage and offloading vessel for oil, which is owned 85% by Ithaca and is proximate to the Captain field.
The transaction will be carried out based at an estimated value of the acquired facilities between $875 million (based on current known production) and an estimated $1.05 billion, depending on the de facto daily production and total actual reserves of the relevant areas, in addition to a further number of conditions detailed in the LOI.
The parties will act to add additional assets to the venture, beyond the acquired facilities, to maximize and create value for the new infrastructure company, including facilities owned by the buyer.
The LOI establishes a timetable to carry out due diligence and to enter into a binding agreement. It includes a number of commercial conditions for the proposed transaction, which will serve as a basis for negotiations on the terms of the binding agreement. Inter alia, it is stipulated in the LOI that the infrastructure company will be able to take decisions on material matters, budgetary issues, expenses, distributions and financial matters that will be defined by the parties in the detailed agreement, with Ithaca’s approval.
It is clarified that the LOI is not binding and that it is the intention of the parties to negotiate the signing of a binding agreement. The binding agreement (if it will be signed) will be subject to a number of contingent conditions, including receipt of the required approvals, as agreed between the parties as part of the binding agreement.
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