Delek Group profit drops as gas production slides – Reuters

JERUSALEM | Wed Aug 29, 2012 9:41pm IST

JERUSALEM Aug 29 (Reuters) – Israeli conglomerate Delek Group reported a drop in quarterly profit as gas production at its Mari B well declined.

Delek said on Wednesday it earned 51 million shekels ($13 million) in the second quarter, down from 101 million in the year earlier period.

“A significant decline in the ability to produce natural gas from the ‘Mari B’ reservoir continued in the past few months,” Delek said.

Egyptian state-owned oil and gas companies in April said they were stopping gas sales to Israel, part of a 20-year deal, following a year of sabotage and pipeline attacks that had already disrupted supplies. Egypt had supplied 40 percent of Israel’s gas needs.

This required solely relying on Israeli gas, mainly the Mari B well. But that well is rapidly depleting so production has been limited to preserve stocks until the large Tamar prospect comes online next year.

In late June, gas began flowing from two smaller wells, Noa and Pinnacles, “to reduce the impact of the decline in the natural gas supply capacity of Mari B, and mitigate the consequences for its customers,” Delek said.

Tamar, with an estimated 9.7 trillion cubic feet of reserves, is owned mainly by U.S.-based Noble Energy and Delek units Delek Drilling and Avner Oil Exploration .

The company has signed a number of contracts for Tamar, including state-run electric utility Israel Electric Corp .

“The development of the … Tamar reservoir remains on track for production, and we are confident this will have an immediate positive impact on cash flow starting from April 2013,” said Delek CEO Asaf Bartfield.

Delek noted Tamar remained on track to start production in the first half of 2013.

It said its bottom line was also hurt by smaller profit at its U.S. unit, Delek US, a steeper loss from its insurance and finance operations, and a move to a loss in its automotive business.

Delek said its sale of 5.15 percent of shares in Delek US generated an expected profit of 134 million shekels and will be recorded as an increase in shareholders equity in the third quarter.

It said it would pay a dividend of 7.03 shekels a share, or a total of 80 million shekels, next month.