stock Delek Group Today (Wednesday) fell by about 9%, after the Ithaca subsidiary completed an IPO in London at the lower end of the requested value range – 2.9 billion dollars – while the upper range of the offering was set at a value of 3.6 billion dollars.
● Answer is issued by Ithaca in London and Delek Group’s debt is expected to continue to decrease
● Delek came close to collapse, then the cards were shuffled in favor of Yitzhak Tshuva | Surgery
Delek Group’s stock has already realized about 12% since it climbed to a more than three-year high last August. However, even after this realization, the stock still shows a fantastic return of over 100% from the beginning of 2022 (the company is traded at a value of about NIS 10 billion).
The subsidiaries Ithaca andNew Med (formerly Delek Drilling), which in the last year have shown strong financial results, thanks to the high demand in the world for energy products, and the high oil and gas prices as a result.
Ithaca, which operates in the field of oil and gas exploration and production in the North Sea (north-east of the coast of Scotland), was responsible for a significant part of this year’s positive return. However, even earlier it almost led to the collapse of Delek Group in the first half of 2020.
To know the story of Ithaca you have to go back seven years. In 2015, the Delek Group, headed by controlling owner Yitzhak Tshuva, invested $66 million in the purchase of 20% of the shares of Ithaca – a Canadian company whose shares were then traded on the London and Toronto Stock Exchanges. Less than two years later, in 2017, Delek Group completed a full purchase offer for Ithaca shares with an investment of 520 million dollars and became its sole shareholder.
Write-offs of NIS 2.8 billion on Ithaca
The next big move was made by Ithaca in the summer of 2019, when it agreed to purchase the activities of the Chevron company in the North Sea, for 1.75 billion dollars. The deal was completed in November of the same year, and as part of it, Ithaca acquired ten producing gas and oil assets in the North Sea, and a transmission and storage infrastructure that includes pipelines and drilling rigs. In addition, the purchase strengthened Ithaca’s position as an operator of drilling rigs in the reservoirs it owns, with the aim of making it a significant company in the North Sea.
But just a few months later, the picture changed completely. The corona epidemic spread around the world, closures and restrictions were imposed in most countries and the price of oil from the North Sea (Brent oil) dropped to a low of about 20 dollars per barrel – close to the price of its production cost. As a result, Delek Group fell into a severe crisis. It made write-offs of about 800 million dollars (2.8 billion NIS) on the investment in Ithaca within three quarters, and ended the first half of 2020 with a loss of 3.1 billion NIS.
Delek Group’s equity was cut to only NIS 1.4 billion, and it was forced to realize assets quickly and raise capital from the controlling owner and the investing public. All this, with the aim of maintaining its two main investments, Ithaca and New Med Energy.
It didn’t take her long to recover: by the end of 2020, the Brent price had returned to $50 per barrel under the influence of the first signs of an exit from the crisis and the development of corona vaccines. At the end of June 2021, the Brent price was already approaching 80 dollars per barrel following the decline of the epidemic and the success of the vaccination campaigns around the world.
The increase in the price of oil brought a leap in profitability
Since mid-February of this year, Brent oil has been trading at more than $100 per barrel, following the invasion of Ukraine and the embargo announced by European countries and the United States on Russian oil. For Ithaca, this is a leap forward in profitability levels, which also led to new investments, in the form of four purchase transactions that increased the volume its activity.
Ithaca ended the first half of 2022 with a 113% growth in revenue to $1.36 billion, and with an even sharper 139% growth in EBITDAX (earnings before financing expenses, tax, depreciation, amortization and exploration) to $904 million. The net profit jumped 13 times in the same period to an even higher amount of 1.47 billion dollars, thanks to opportunistic profits from the acquisition of companies.
At the same time, Ithaca began preparing to issue its shares on the main London Stock Exchange with the aim of becoming an independent platform, and this in view of Delek Group’s desire to sell some of its shares in order to continue to reduce its debts.
Last week, Ithaca published the tender book, with an invitation to submit offers for the purchase of shares from Delek Group at a value of 2.9-3.6 billion dollars (2.5-3.1 billion pounds) for Ithaca.
On Tuesday, as mentioned, the move was completed, when Delek Group sold 105 million shares of Ithaca (10.4% of the capital) at a price of 250 pence and in return for 304 million dollars. In addition, the underwriters received an option to purchase from Delek another 15 million shares of Ithaca (0.9% of the company) at the issue price, the exercise of which will increase the amount of consideration to $345 million.