Noble Energy, Inc. announced the signing of a non-binding memorandum of understanding (MOU) regarding the sale of interest in the Leviathan licenses, offshore Israel, to Woodside Petroleum.
Each of the existing Leviathan partners, Noble Energy, Delek Drilling, Avner Oil Exploration and Ratio Oil Exploration, are participating as sellers of a 25% interest in the licenses to Woodside. Noble Energy will convey a 9.66% working interest (WI) and will continue as upstream operator with a 3% WI. Following completion of the transaction, Woodside will become the operator of any LNG development of the field.
"Our partnership is excited to have executed this MOU with Woodside who brings extensive global expertise in LNG operations and marketing to the partnership. Their addition to the project will result in substantial added value while also bringing us much closer to when we will be able to sanction Leviathan for development,” Charles D. Davidson, Noble Energy's chairman and CEO, said.
Total compensation to Noble Energy is anticipated to include US$525MM in cash payments plus $502MM in shared future revenues. The initial cash payment of $390MM is payable at closing of the transaction, which is expected in 2014.
The remaining cash amount of $135MM is due when a final investment decision is made in relation to an LNG or FLNG development or as regional export contracts are executed in excess of a threshold volume amount, whichever occurs earlier. The shared future revenue represents 5.75% of export revenue attributable to Woodside's net export sales, commencing once the gross exported volume from the Leviathan field exceeds 2Tcf of natural gas.
An additional payment of $19MM, net to Noble Energy, will be made should ultimate recoverable Leviathan resources be determined to be in excess of 20Tcf gross of natural gas. The determination and payment will occur no earlier than when cumulative field production reaches 4Tcf. In addition, the sellers will receive a royalty of 2.5% of Woodside's future oil revenues associated with the deep Mesozoic should a commercial discovery and development result on the licenses. The royalty would go into effect following net payout of investment.
The MOU includes the agreed-upon commercial terms of the farm-out transaction and sets the timeframe for execution of definitive agreements. The transaction remains subject to the execution of definitive agreements between the parties, as well as necessary and customary regulatory approvals.
The Leviathan project is located on the Rachel and Amit licenses offshore Israel in 5550ft of water. It has an estimated 19Tcf of discovered natural gas resources.
Following completion of the transaction, working interests in the Leviathan Project will be: Noble Energy%, Delek Drilling (16.94%), Avner Oil Exploration (16.94%), Woodside Petroleum (25%), and Ratio Oil Exploration (11.12%).