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Delek Group Announces Consolidated Results For The First Nine Months Of 2012

Karish 1 Prospect; In November, the partners announced a new 2 TCF prospect at the "Karish 1" area in the Alon C license. A seismic survey by Netherland Sewell & Associates Ltd. gave a best estimate of the unrisked gross prospective gas resource of 2.02 TCF with a 50% geologic probability of success. The low estimate is 1.07 TCF (90% geologic probability of success) and the high estimate is 3.38 TCF (10% geologic probability of success).

Liquefied Natural Gas Project; In November, the Pre-FEED stage of the Tamar and Dalit floating liquefied natural gas project (FLNG) was completed. The Tamar partners began the second FEED phase. LNG production is expected to be up to 3 Million Metric Tonne Per Annum (MMTPA). Daewoo Shipbuilding & Marine Engineering Co. Ltd. (DSME) signed an agreement with Levant LNG Marketing and Pangea LNG BV for the completion of the FEED stage. DSME will carry out the costs of FEED and the Tamar partners will contribute a total amount of $15 million (100%). The agreement is for two years, or until the date of the final investment decision of the FLNG project, whichever is earlier.

Gas Production Summary; During the first 9 months of 2012, revenues from the sale of oil and gas reached NIS 611 million compared with NIS 572 million in the same period, last year. The increase in revenues was due primarily to the consolidation of Avner starting from the first quarter in 2012.

Net loss from the sector for the first nine months of 2012 was NIS 6 million, as compared to a net income of NIS 165 million in the same period during of 2011. The decline in profit during the reporting period compared to last year was due to the above-mentioned decline at the "Mari B" reservoir. However, this moderated in the third quarter as natural gas supply increased from the Noa and Pinnacles reservoirs. In addition, depreciation and amortization expenses relating to the development of these assets were recorded in the third quarter for the first time.

Delek US (NYSE: DK; Delek Group holds 53% end-Q3 2012): Revenues in the first nine months of 2012 were NIS 25.3 billion compared with NIS 18.3 billion in the first nine months of 2011. The growth was due to the consolidation of the Lion Oil refinery in El Dorado, as well as due to the increase in the price of oil which affected sales in both the refining and marketing segment, and in fuelling stations. The results of the third quarter also benefited from a benchmark Gulf Coast 5-3-2 crack spread that averaged $29.96 per barrel during the third quarter 2012. This was similar to third quarter 2011 and an improvement from $25.42 during the second quarter 2012.

Net profit in the first nine months of 2012 was NIS 842 million compared with a net profit of NIS 603 million in the first nine months of 2011. The improved profitability was due to the increased gross margins in the El Dorado refinery as well as the operation of the Tyler Refinery at the peak capacity of over 60,000 barrels per day during the third quarter.  

On July 12, Delek US's wholly-owned subsidiary, Delek Logistics Partners, LP, filed a registration statement with the SEC relating to a proposed initial public offering. On November 4, Delek Logistics Partners, LP, issued the pricing of its initial public offering of 8,000,000 common units in addition to 1,200,000 common units for the over-allotment, representing limited partner interests in Delek Logistics at $21.00 per unit. The common units began trading on the New York Stock Exchange on November 2, 2012 under the ticker symbol DKL. Delek Logistics was formed by Delek US to own, operate, acquire and construct crude oil and refined products logistics and marketing assets. Following the offering Delek US's stake in Delek Logistic is 37.6%.

During the third quarter, Delek Group sold approximately 10.2% of the outstanding shares of Delek US in two tranches of 3 million shares, for a total of approximately US$147.6 million. Following the sale the Group held approximately 57% of the outstanding shares of Delek US.

The excess of the carrying value of the investment cost (net of the related tax effect of approximately NIS 64 million) in the amount of approximately NIS 208 million was recorded in the third quarter of 2012 as an increase in shareholders' equity attributable to shareholders of the Company.

In November, the Company sold an additional 2.2 million shares or 3.7% of the Delek US for approximately $57 million. Following this sale, Delek Group holds approximately 53% of Delek US.

The excess of the carrying value of the investment cost (net of related tax effect of approximately NIS 26 million) was in the amount of approximately NIS 78 million and will be recorded in the fourth quarter of 2012 as an increase in shareholders' equity attributable to shareholders of the Company.

Delek  -  the Israel Fuel Company Ltd. (TASE: DLKIS.TA; Delek Group holds 87% end-Q3 2012): Revenues in the first nine months of 2012 were NIS 5.0 billion compared with NIS 4.7 billion in the same period last year, representing an increase of 5%. This increase was due to the rise in the average price of gasoline during the period compared with that of last year, an increase in sales of the direct marketing segment and an increase in sales at the Menta convenience store.

Net income in the first nine months of 2012 was NIS 24 million, compared with a net income of NIS 25 million in the first nine months of 2011. Delek Israel's results were impacted by the lowering of fuel marketing margins between the comparable reporting periods. Delek Israel has and continues to take steps in order to mitigate the effects.

Delek Europe (Delek Group holds 80% end-Q3 2012) Revenues in the first nine months of 2012 were NIS 12.3 billion compared with NIS 11.9 billion in the same period last year, an increase of 3.4%. Net income in the first nine months of 2012 was NIS 68 million, compared with a net income of NIS 20 million in the first nine months of 2011. The increase was due to the increased price of gasoline compared with that of last year, as well as increased sales at its convenience stores however this was offset by a decrease in the quantity of fuel sold.

Roadchef (fully held by Delek Group). Roadchef's revenue in the first nine months of 2012 was NIS 1.042 billion versus NIS 909 million in the first nine months of last year, an increase of 15%. Net profit for Roadchef was NIS 1 million in the first nine months of 2012 versus a net loss NIS 13 million in the first nine months of last year.

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