NewMed Energy - Limited Partnership (NWMD) Earnings Call Transcript & Summary

Hi, everyone. Thank you for joining us today for NewMed Energy 2024 First Quarter Webinar. [Operator Instructions] As a reminder, this conference is being recorded. I'm pleased to introduce Yossi Abu, CEO of NewMed Energy. Yossi, you may begin.

Thank you very much, Nora. Thank you, everybody, for joining us this afternoon here in Israel. We'd like to take you through our financial results of Q1 2024 and the key highlights from -- and the status of the -- of our activities. So without further ado, we'll go directly to the points. In the first quarter, basically, we achieved a little bit more than 1 Bcf a day of sales, a total of 2.63 BCM at The quarter. We finalized in a very stable way $121 million net profit, EBITDA of a little bit shy of $180 million. We'll take you through a few operational updates. First, we actually started this quarter -- it was in the end of the quarter, but in Q1, we started the condensate sale into the Israeli market. We're talking about roughly 2,500 barrels a day. On top of that, we are on budget, on schedule on the third gathering line. And as we updated last week, we signed a new local market, GSPA to Eshkol Energies, which is IPP, new IPP in the market, part of the Dalia group that already exists. I will take you as well through an update on Leviathan expansion and Aphrodite development plan. And we announced, as you saw, a $60 million dividend, remaining a very stable dividend stream through the last quarters. So going back into the result of the Q1. As you can see, we sell 2.63 BCM vis-a-vis 2.8 BCM in the equivalent quarter last year. The reason is a little bit of a slowdown mainly in the Israeli market, but we increased the export to Egypt for 1.5 BCM last -- the first quarter of last year to 1.8 BCM in this quarter, so an increase of around 20%, and Jordan remained stable, a bit stable in the consumption. On the prices, we arrived to a bit higher price $6.16 vis-a-vis $6.09 of the equivalent quarter. Now in this slide, and I show you from quarter to quarter, I basically showed this slide, what you can see is that we are remaining in a very stable prices. And as you know, most of our gas flow and GSPA are Brent linked with a floor price. But yes, what you can see here is really -- we are really protected in the downside. So even if you go to June '20 and you look on $30 barrel price, you would see that we maintain very stable gas prices on the lower side, so enjoying some of the upside of the Brent, but maintaining stable gas prices below this point. Going on the Israeli market when we are seeing a very significant growth in the natural gas demand in the Israeli market. What we are expecting to see is more contract as we signed last week the Eshkol contract, it's around 0.5 BCM a year with additional sales based on interruptible basis. But in the end, what we are seeing is 2 main drivers to a very significant increase in the demand in the Israeli market: One, is a coal reduction. And currently, the government target that by 2026 will not see significant production from coal in the market. So vis-a-vis, around 20% of our electricity last year was from coal. We are expecting to go very close to 0 by 2026. And the other one is a very big demand for electric car in the Israeli market. And in the end, when we are looking on 2027, 2028, we are expecting natural gas to be almost 80% of the electricity basket in the market, meaning natural gas in Israel in the end is fueling the electric cars. So that's there. And those are the main drivers to the demand on top of the usual drivers, which is basically the growth in population and the overall growth in the economy. On the operational side, as I mentioned, we start to flow gas and sell -- sorry, flow condensate to our customer in the South, and we are only timetable and on budget on the third gathering line. What it basically means is that by mid next year, we'll be able to flow rather than the 12 BCM that we can do on a yearly basis to the market, we can reach 1.45, 1.4 Bcf a day, which bring us to the area of 14, 14.5 Bcms by mid-next year. Now on the expansion of Leviathan, we are running forward, and we are very close to enter into a full FEED, so we just approved a budget by Chevron and NewMed [indiscernible] of $32 million just for the next weeks to try and take us to the full budget of the FEED, and we are expecting to enter into FEED very soon. In parallel to that, we are continuing working on the connectivity to the Egyptian market. And as you can see, in this map, we are expecting the Ashdod-Ashkelon looping to be finalized somewhere the end of Q1 2025 or early Q2 2025. On top of that, we are running forward with the Nitzana export route and we increased the capacity in the Arab gas pipeline to flow more gas to Egypt through Jordan, all of those may take us by 2027 to a total capacity to be able to flow to the Egyptian market of more than 21 BCM a year. So basically a full regional connectivity, enabling to, really, to take all the gas that will be available from the Israeli market to the Egyptian market. And again, I think what you can see here quarter-on-quarter, we are seeing a very, very stable net profit. And we are very happy that, that give us the ability to work on the 3 different, I would say, pillars of our activities. So basically, continue to invest in internal growth, so second phase of Leviathan, development of Aphrodite in parallel to maintaining a balance on our debt to NPV ratio. And on top of that, continue with very clear dividend streams to the quarter-on-quarter. So to go into more details with P&L, I will ask Tzachi Habusha, our CFO, to take it from this point.

Thank you, Yossi, and thank you all for being with us today. And let's start. So I'd like to share a few key points regarding our performance in the first quarter. As you can see, our net profit stands at approximately $121 million, slightly higher than the same period last year. And moreover, the partnership's total debt has significantly decreased, as I will discuss in more detail later. Here is a very good slide illustrates the main changes affecting our net profit compared to Q1 of last year. We saw a reduction in natural gas revenues after royalties amounting to $14 million. This included an $18 million decrease due to a lower selling of natural gas quantities, as Yossi mentioned, from previous level of approximately 2.8 BCM to 2.6 BCM this quarter. However, this was offset by $2.3 million increase due to a higher average gas price per MMBtu and $1.8 million from the sale of condensate, which began on March 7 to the Ashdod refinery via the PEI pipeline. Here, I'd like to emphasize that the condensate sale will increase our total income and the net profit from here on. Other factors affecting our net income include a $0.6 million increase in operating expenses and a $50 million decrease in net financial expenses, mainly due to our buyback program, the full repayment of Leviathan Bond Series June 23, and our reevaluation of Karish and Tanin royalties. Regarding our balance sheet, we have seen a dramatic reduction in our debt position. On June 30, we repaid Leviathan Bond Series 2023 in the amount of $500 million. Here in this slide, this slide shows us the reduction in our debt compared to the previous periods. In addition to the repayment of Leviathan bonds at June '23, we also repaid our Tamar bonds and Series A bonds at the end of 2021. As of March 31, our total debt is approximately $1.75 billion, consisting of Leviathan bonds with a maturity date in 2025, 2027 and 2030. These bonds which have a fixed interest rates place us a strong -- in a strong financial position and positively impact our financial cost this quarter and will continue to do so in the near future. Finally, as Yossi mentioned, the partnership declared a $60 million profit distribution. This was in addition to a $60 million declaration in last March that was paid in last April. This includes the key points regarding the Q1 financial statement. Thank you, Yossi, and thank you all.

Thank you very much. We will see if we have any questions and obviously, we'll take those. So a few minutes.

Well, great. We didn't see any meaningful questions. Yes, just 1 popped up. Basically, we already have a significant cash flow obviously...

So the question is how do we intend to address the next bond maturity of $600 million due to be paid in mid-25?

So as you know, practically, we have a very, very strong cash flow. So most of the payment will come from the cash flow. I think that we have as well a $100 million, $150 million, actually, which is basically open to us to withdraw if we need it. But currently, we are not looking on a new bond or something significant. It will be mainly from the cash.