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Published an updated capitalized reserves and cash flow statement from the Tamar Reservoir, prepared by an External Reserves (NSAI) reflecting a current value of approximately $ 1.58 billion (2P), for the Company’s share in the Reservoir (at a discount rate of 10%) compared to a value of approximately $ 1.73 billion as of 31.12.19. A decrease of about 8.5% in the value of the database according to the updated report.
Among the factors are a decrease in the value of the reservoir, a decrease in demand in light of the corona crisis and a decrease in the contractual quantities in 2020-21 to the minimum threshold required by the agreements. The report also states a maximum price reduction in the agreement with the electricity company – a 25% reduction in the price starting from 01.07.21. And a further reduction of about 10% on 01.07.24.
The report on a class action lawsuit filed by a consumer of an electricity company against the partners in the Tamar project also states that the partnership’s legal counsel estimates that the chances of receiving the lawsuit are less than 50%, however, noting that if the lawsuit is accepted, the impact on the current report is significant. And the extent of the harm will be derived from the outcome of the claim.
The partnership reports that the volume of proven and expected gas reserves (2P) in the Tamar reservoir is as of 30.6.2020 about 301 BCM.
The partnership has updated the discounted cash flow data, the following are the main changes compared to December 31, 2019:
Decline in demand and sales forecast
Estimates regarding the effects of the corona crisis and the expected increase in renewable energies on the demand for natural gas in the local market are expected to affect the amount of sales from the Tamar reservoir. The change in the timing of the investment in the third transmission pipeline is also expected to affect alongside the quantities sold in light of domestic market demand, given additional capacity from operating the third pipeline, updating the partnership discounts on the start of commercial production and sales volumes from the Shark and Crocodile project.
Other factors that supported the lowering of the sales forecast – developments in local and regional markets. Reduction of the contractual quantities to be sold in 2020 and 2021 according to the export agreement to Egypt to the minimum required in accordance with the agreement.
Decreased expected average selling price
Update of the IEC price adjustment rate forecast – As part of the discounted cash flow, it was assumed that in addition to the maximum price reduction in the agreement with the IEC on the first adjustment date of 25% (1.7.2021), a maximum price adjustment of 10% will be made on the second adjustment date (1.7.2024 ).
Updating the forecasts of indices to which the selling prices are attached, in particular the electricity production rate, the Brent price, the US consumer price index and other forecasts, which were affected, among other things, by the corona crisis, including fixing the Brent price from the tenth year to the cash flow period. Update discounts on sale prices in future agreements.
In addition, the operating costs and investments made up to 30.6.2020 were updated, in accordance with the actual investments made. The operating costs and future investments forecasts were updated in accordance with the partnership’s assessment, based, among other things, on the production profile in light of the demand in the domestic market, and estimates received from the operator and updated, among other things, in light of expected efficiencies and reductions in operating budgets.
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