To develop gas reserves in Egypt and Israel, Capricorn Energy plans to merge with Israel’s Newmed in a packaged equity deal following a $620 million special dividend.
Britain’s Capricorn Energy officially launched in Egypt last September (2021) with a deal to acquire Shell’s assets in the Western Desert, on par with Chiron, with an investment valued at $323 million each, the dedicated energy platform tracks.
The British oil and gas exploration company has decided to abandon its previous plan to merge with Tollo Oil, according to energy news platform TAQA.
The merger deal between Capricorn and Newmed aims to focus on gas fields in Egypt and Israel, including Newmed’s stake in Israel’s giant Leviathan offshore field, at a time when Europe is seeking energy sources outside of Russia.
The new group will be part of NewMed, formerly known as Delek Drilling, and will be led by Yossi Apo, CEO of the Israeli company, whose shareholders will own 89.7% of the combined company.
Shares of Capricorn traded more than 10% after the merger announcement, reaching their highest level since 2018, while Twilo Oil shares fell 3.6% and NewMed shares fell just under 1%.
Yossi Apo said the new group will aim to increase production to over 200,000 barrels of oil equivalent per day by the end of this decade from 115,000 barrels of oil today.
“We are in the process of building a company that will, for the first time, allow international investors to directly develop gas reserves in the eastern Mediterranean and in particular the Leviathan field,” added the CEO of NewMed.
Natural gas production in Israel increased by 22% in the first half of 2022 to a record high of over 10.85 billion cubic meters. Most of the increase in production comes from the Tamar and Leviathan fields in the eastern Mediterranean.
Newmed will be the first Israeli company to own oil and gas assets in Egypt, which has a population of about 100 million.
Israel started exporting gas to Egypt last year (2021), and since then Israel has been supplying an average of 5 billion cubic meters of gas to Egypt annually via the Ashkelon-Al-Arish Eastern Mediterranean gas pipeline.
NewMed CEO Yossi Apo said the merger with British energy company Capricorn strengthens NewMed’s position as a potential gas supplier to Europe, adding that the company is still exploring options to continue developing the Leviathan field.
He stressed that one of the available options is the construction of a floating LNG station, which is supported by the Israeli government.
Israel has two developed natural gas fields, Tamar and Leviathan, but there are currently no LNG plants in the country.
The second option is to connect to gas liquefaction stations in Egypt through an offshore gas pipeline.
LPG exports from Egypt are expected to rise sharply this September (2022) due to production in Israel and the degree of consumption rationalization available locally.
The number of shipments that Egypt will export by the end of this month is expected to increase to at least 7 shipments, and the early start of the Karish field off the Mediterranean coast is expected to support these exports.
Some Capricorn investors have opposed a plan to merge with Twilo, in which the UK oil and gas company’s shareholders will own just over 10% of the new company’s shares, with the deal expected to close in the first quarter of next year (2023).
On the other hand, Palliser Capital, which is one of the largest shareholders of Capricorn Energy, called a general meeting of the company to consider the dismissal of seven members of the executive management, including the company’s CEO Simon Thompson and the chief financial officer. James Smith, according to Reuters. Palliser is Capricorn’s third-largest shareholder and one of the energy giant’s investors who have expressed opposition to a possible merger with Israeli energy company NewMed.
Israeli NewMed announced in October its plans to merge with Capricorn Energy after the latter’s shareholders, including Palliser, blocked a previous plan to merge with Tuluoil on the grounds that it “undervalues the company.” The new deal, if completed, is expected to give NewMed full control of Capricorn’s assets in Egypt, which could pave the way for closer energy ties between Egypt and Israel and create what the company has called the “Middle East and North.” African gas and energy giant.
Shareholders who own more than 40% of Capricorn are opposed to the planned merger on the grounds that it devalues the company and “unnecessarily biases NewMed.” Palliser also said it had assurances from another 28% of shareholders who, according to the agency, “have lost confidence in the current board of directors.”
Palissir’s list includes a number of candidates, including Hisham Makkawi, former BP regional head for North Africa, and Christopher Cox, former CEO of Spirit Energy. The company intends to call a general meeting by January 30 to vote on its plan, Reuters said.
NewMed had hoped to close the deal within the first quarter of 2023, according to what CEO Yossi Abu recently said, which reduces the importance of Capricorn’s shareholder objections. At the time, Abu expected that the shareholders of the two companies would eventually agree to a merger.