Delek Group reports Q1 2021 results - Net profit of ILS 279 million compared to a loss of ILS 2.8 billion in Q1 2020

HERZLIYA, Israel, May 31, 2021 /PRNewswire/ --

• Revenues of ILS 1.91 billion in Q1 2021, compared with ILS 1.88 billion in Q1 2020;
• Operating profit increased to ILS 871 million, from a loss of approx. ILS 2.7 billion in Q1 2020;
• Continued decline in the net financial debt of the Company and its staff companies as of March 31, 2021, which amounted in to ILS 4.2 billion as of March 31, 2021;
• Increase of approx. ILS 350 million in the shareholders equity, which amounted approx. ILS 2.43 billion as of March 31, 2021, from ILS 2.09 billion as of December 31, 2020;
• The bondholders' meeting approved the amendment to the Deed of Trust, which includes a postponement of the date of review of the rating covenant by several instalments from May 31, 2021 up to March 31, 2022, concurrently with additional actions to which the Company undertook;
• Thanks to a series of successful moves led by the Company's management, its financial flexibility has improved significantly, such that the assets owned thereby will enable it to generate the cash flows it requires against its liabilities.

Idan Wallace, Delek Group CEO: "The first quarter results indicate strong performance by our core business activities in the energy sector in Israel and in the North Sea. The significant increase in the volume of production and sales from the Leviathan reservoir, as well as the contribution of the rise in the energy prices and the continued strengthening of the financial position of Ithaca, have allowed Delek Group to present a net profit of ILS 279 million in the quarter, compared with a loss of close to ILS 2.8 billion recorded in the same quarter last year. At the same time, we are continuing to work to strengthen our liquidity and equity. In this context, the bondholders have approved the amendment to the updated Deed of Trust, which enables postponement of the date of review of the rating covenant by a number of instalments, in exchange for a series of additional measures we will implement in order to continue improving the Group's financial position. We are continuing to promote additional significant moves while taking advantage of the financial flexibility we have been able to obtain following the steps we have taken over the last year, such that our assets, which include, among others, Ithaca, the unencumbered participation units in Delek Drilling, the balance of the holdings in Delek Israel, the overriding royalties from Leviathan, the seller's loan to the Phoenix buyers, and our real estate properties, will enable us to generate the cash flows required by the Group".

Delek Group (TASE: DLEKG) today, Monday, May 31, 2021, released its financial statements for the first quarter of 2021. The Group's net profit amounted to ILS 279 million, compared with a loss of close to ILS 2.8 billion in the same quarter last year. The operating profit has increased to ILS 871 million, compared with an operating loss of approx. ILS 2.7 billion in the same quarter last year. The increase in energy prices and the sharp increase in the volume of production and sales from Leviathan, have led to an increase of 77% in the contribution from continuing operations (before asset impairment/revaluation, capital gains/losses, financing, tax and other revenues or expenses) to some ILS 307 million, compared with ILS 173 million year-over-year.

The Company's bondholders approved the amendment to the Company's updated Deed of Trust, in which context the date of review of the rating covenant will be postponed by a number of instalments from May 31, 2021 up to March 31, 2022. At the same time, the Company undertook to take a series of measures to continue strengthening its equity and liquidity. The amendment was made possible after the Company's management had successfully completed, over the last year, a series of significant moves which considerably improved its financial position, allowing it to meet all of its liabilities and providing it with financial flexibility to meet its future liabilities.

The improvement in the Group's financial position is reflected in the continued decline in the net financial debt of the Company and its staff companies, to ILS 4.2 billion as of March 31, 2021, down approx. ILS 140 million from December 12, 2020, and down more than ILS 2 billion in total from March 31, 2020.

The profits in the quarter, as well as the strengthening of the dollar in the quarter, led to a continued increase in the shareholders equity to ILS 2.43 billion, compared with ILS 2.09 billion as of December 31, 2020, up about ILS 350 million.

The energy business in Israel

The positive trend in the results of Delek Drilling (54.7% held) continued also into the first quarter of 2021, with a significant increase in the volume of sales from Leviathan, to 2.7 BCM, up from 1.6 BCM in the same quarter – a 65% increase year-over-year, reflecting an annual run-rate of 10.8 BCM, compared with a production forecast of 10.2 BCM for 2021. The total export to Jordan and Egypt accounted for 54% of the Leviathan sales in the quarter. Sales to the Israeli market amounted to 1.26 BCM, compared with 0.73 BCM in the same quarter.

Revenues in the first quarter amounted to ILS 778 million, compared with ILS 674 million year-over-year, up 15%. The net profit attributed to the Group's shareholders amounted to ILS 166 million, compared with ILS 158 million year-over-year.

Delek Drilling is continuing to promote its issuance on the London Stock Exchange. In this context, a motion has been filed with the court to approve the convening of a general meeting to approve the exchange of the participation units for shares of a new company incorporated in England (New Med Energy), which is expected to be issued in London and traded concurrently in Tel Aviv.

In April 2021, Delek Drilling announced it has signed an MOU with Mubadala Petroleum for the sale of its rights in Tamar (22%) in consideration for $1.1 billion (100 million of which as consideration contingent on the achievement of targets).

Energy operations in the North Sea

Ithaca, a company wholly owned by Delek Group, contributed revenues of $345 million and a cash flow from current operations of $221 million in the first quarter of 2021, similarly to the same quarter last year. The contribution of the increase in the prices of oil and natural gas was offset by a decrease in the production quantity and a decrease in profit due to hedging transactions, as a result of the increase in energy prices. The average daily output in the quarter was 65 thousand BOE, in line with the company's forecasts of average production of 60-65 thousand BOE per pay in the years 2021-2023. The cost of production was $16 per BOE, similarly to the same quarter last year. Ithaca's share in the contribution of continuing operations before discontinued operations, capital gains, financing, taxes and other expenses was ILS 141 million, compared with ILS 37 million year-over-year. The increase arises from, among other things, a decrease in financing expenses and a decrease in depreciation expenses.

The net profit to Delek Group from Ithaca's North Sea operations, after tax, was $43 million, compared with a net loss of $655 million year-over-year, which included a provision for impairment of oil and gas assets and goodwill in the sum of $667 million after tax.

During the quarter, Ithaca continued to reduce its financial debt, including the RBL financing (Reserve Based Lending Facility). Ithaca's net financial debt decreased by some $150 million in the first quarter of 2020, to $1.07 billion as of March 31, 2021.

The RBL redetermination was completed in May 2021, and a $15 million dividend was distributed to Delek Group. The credit facility was updated to $825 million reflecting a headroom of $275 million.

Delek Group is continuing to promote moves to unlock value at Ithaca and is working to list Ithaca's shares for trade on the stock exchange in London and in Tel Aviv. Concurrently with the listing, possibilities are being explored to exchange some of Delek Group's bonds for Ithaca shares and/or carry out a public offering of Ithaca and/or introduce a partner.

As part of the offering process, Ithaca is also promoting a refinancing of its RBL facilities and its bonds, in the near future, such that the closing thereof will enable the extension of the average duration of Ithaca's financial liabilities, increase of the RBL facilities and Ithaca's financial flexibility, as well as repayment of shareholder loans and a dividend distribution to Delek Group of $300 million out of the amounts to be received by Ithaca as part of the said refinancing.

Other activities

During the quarter, the Group completed the valuation of the investment in Delek Israel as of the date of sale of control. The measures taken by the buyer to improve the operations, inter alia by splitting up Delek Israel into a real estate company and a retail company and improving both companies, have led to an increase in the valuation of Delek Israel to more than ILS 1 billion, following which the profit from the disposal of Delek Israel increased by ILS 57 million. The contribution of Delek Israel to the net profit in the first quarter of 2021 was ILS 13 million, ILS 7 million of which profit from the bringing forward of some of the deferred consideration and exercise of an option by the buyer, and ILS 6 million net profit of Delek Israel in the quarter.

The balance of the loan provided by Delek Group to the buyer of the Phoenix amounted to about ILS 270 million as of March 31, 2021. The seller's loan, the earnout components and other consideration adjustments are measured in the financial statements at fair value through profit and loss. In view of the continued increase in the Phoenix stock price, the fair value net of such instruments, as of March 31, 2021, amounted to about ILS 213 million, compared with ILS 143 million as of December 31, 2020. Consequently, the Company recorded a profit of ILS 70 million in the report period, which is presented in the profit from discontinued operations item.

Financial position

The Company's bondholders have approved the amendment to the updated indenture, in which context the rating covenant review date will be postponed in several instalments from May 31, 2021 up to March 31, 2022, subject to a series of concurrent deposits into the trustee's account for the repayments due in Q1 2022. The Company further undertook to raise capital in an amount ranging between ILS 125 and 200 million, to undertake best efforts to complete Ithaca's IPO by September 15, 2021 and to remit to the trustees the amounts to be received from such it by Delek Group, for the making of the payments to the Company's bondholders due in Q1 2022. In addition, the interest on the bonds of all series will increase by an annual rate of 0.25% from June 1, 2021 until the rating is upgraded to BBB-. The approval was made possible after the Company's management successfully completed, over the past year, a series of significant measures which considerably improved Delek Group's financial position. These measures included asset disposals of some ILS 3.4 billion, capital raising of some ILS 500 million, payments of bond principal and interest of ILS 1.6 billion and payment of the full debt to the banks in the sum of some ILS 2 billion during 2020 and until the report's publication date. These measures enabled Delek Group to meet all its liabilities.

For further details, contact Together, Spokesman for Delek Group –

Ronen Moshe
Tel.: +972-50-888- 5631
Email: Ronen.m@together-ltd.co.il

Roy Argov
Tel.: +972-54-680- 5000
Email: Roy.a@together-ltd.co.il

Delek Group Investor Relations:
Limor Gruber
Tel.: +972-50-523- 9233
Email: Limorg@delek-group.com

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SOURCE Delek Group Ltd