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

Thank you for joining us today for the NewMed Energy Third Quarter Results of 2024. [Operator Instructions] As a reminder, this is a conference call and is being recorded. I'm pleased to introduce Yossi Abu, CEO at NewMed Energy. Yossi, you may begin.

Thank you very much. Thank you, everybody, for joining us this afternoon to discuss the third quarter results of 2024. And I'm very happy and proud to present those results. With me here, we have Tzachi Habusha, NewMed CFO; and Guil Bashan, our VP IR. So thank you both to join me. Basically, what we had in this quarter, we achieved a record quarter for production in Nevatia in a record project quarter for NewMed Energy results with almost 1.2 Bcf a day of production in average. The third quarter earnings will go up to around $147 million net profit. It's 25% higher than the equivalent quarter last year, and the EBITDA -- we reached $121 million. We'll update on the operational side, the third gathering line and obviously, the [indiscernible] looping together with a huge activity around Leviathan Phase Ib that is underway. We are running quite fast with this activity. We will as well take you through our deleveraging and preparing to a new investment cycle in the debt side, and we announced a dividend of $65 million. So on the production summary, we end the third quarter with 3.1 Bcm, 1.8 go to the Egyptian market. A bit higher sales to the Egyptian market due to some debottlenecking activity that we did in the Egyptian receiving terminal in the area of [indiscernible], the area of [indiscernible] that take us from around 500 million, 530 million squares day that we delivered in the past to EMG to around 600 million squares a day that we reached even before the [indiscernible] looking, and this is basically the rate that we are able to flow today to EMG. The Israeli market go a little bit higher to 0.4 to 0.5, mainly due to ESCO powerline that start to consume gas on Leviathan during the third quarter. And you can see Jordan stays steady around 0.8 Bcm quarter. From a pricing perspective, we stayed quite stable and it's mainly brand-related formula. I will remind you all that, certainly those days that Leviathan have a very unique formula that allows us to enjoy the upside of the Brent, but we are quite acted the downside of the Brent. You are familiar with this graph, and then as you can see, even in the worst days of Brent, we managed to secure a significant gap, a significant price for the gas and we have low prices in all our agreements. On the operational side, I would like to update on two things. First, on the third gathering projects, as you can see here in green, we were supposed to finish this project by mid this year due to the situation, the ship that's supposed to lay the pipeline we released, and the ship should come back to Israel Q2 2025, and we will be able to complete the project by year-end. So particularly around 4 to 6 months delay vis-a-vis the previous type level. And that's more or less the same with respect to the total looping, we touch that later on at the connecting pipeline slide. On Phase Ib, we are really progressing forward. And we have not only -- we are progressing that design, we are running with a lot of kids in the market. We are bidding for all the materials that we need, mainly the long lead items. And we already engaged with several very, very important kits for this project. So we are soon taking investment decisions for Phase Ib of Leviathan during Q2 2025, that will allow us to bring gas in the window of mid-'28 or late '28 to mid-'29, that's more or less the window of delivering gas on second phase of Leviathan. And again, our target is to reach around 2.3, 2.4 Bcf a day at second phase, very meaningful upside for production and energy. On the connectivity, so the first thing is [indiscernible] looping. You can see this red pipeline and the South. So this project will end again by the end of -- by Q4 2025. This is the current assumption, maybe you will have some optionality or possibility to win it earlier, but this is the current assumption, that will enable us to increase the flow in EMG pipeline from the 600 to around 800 and more million squares per day. On top of that, the further compression activity the compression system in the north of Jordan are ongoing this project already. We are in a mode of execution, and we believe that, that will enable us by second half -- sorry, by second quarter of 2026 to increase the capacity with around 400 million squares a day to Jordan to Egypt. So that's addition to what we are flowing today. And as you're well aware, on [indiscernible] project, we are running with to try and develop this onshore connection, which will enable us another 6 BCM to deliver the Israeli grid to Egypt. So we'll have EMG with ABC, we'll have Nitana with at least 6 BCM and will have gas flooring to Jordan to Egypt around 7 to 8 bcm, that will allow us to flow more than 20 bcm from the Israeli market to the Egyptian market by 2028. On the results, obviously, going to the bottom line, as you can see, the net profit is $147 million. That's really great news for us that brought us 25% more than the even quarter last year. And you can see as well, we go up in the EBITDA from $220 million, and obviously, the sales is the same. So, really record quarters mainly due to significant sales from Leviathan project, maintaining the prices that we basically assume. On the year targets, we're definitely going to meet our targets to this year in terms of sales, and that's kind of an important thing for us.

Thank you, Yossi. Thank you all for being with us today. I'd like to share a few key points regarding our third quarter results. So let's say, drill down into the numbers. NewMed net profit for Q3 stands at approximately $127 million, about 25% as I mentioned, higher than last year profits of $118 million. The growth is mainly due to an increase in natural gas and condensate sales and reduced net financial expenses, which were offset by higher production costs and taxes. Here, we can see in this slide, demand affected our Q3 net profit compared to the same period last year. Our net revenue increased by $24 million, out of which $14 million due to a better average gas price per annum [indiscernible] and an increase of about $5 million due to a higher natural gas sales rising from approximately 2.9 bcm to 3.1 bcm this quarter. We also received about $4.7 million from the sales of condensate, which started in March this year. Other factors affecting our net income include a $10 million increase in operating expenses, and a decrease in net financial expenses of $20 million, mainly due to a reevaluation of [indiscernible] royalties and the full impairment of Leviathan Phase I Series June '23. Regarding the debt position, as we can see a dramatic reduction in our debt position by the end of June 2023, we repaid the Leviathan bond series 2023 in the amount of $500 million. In addition, as of the report approval date, we bought approximately $91 million from Leviathan bond series on June '25, as a part of our Partnership buyback program. The reduction in 2021, due to the repayment of some [indiscernible] bonds and series bonds. Regarding the balance sheet, two points. First, our financial assets related to [ commissioned-selling ] and royalties. This asset was recognized following the sale of new interest in commission [indiscernible] leases in 2016. As of the date of this financial statement, the fair value of these assets is approximately $284 million, which is presented in long-term assets and short-term receivables. Second, as of September 30, our total debt is around $1.7 billion consisting of Leviathan bonds with a maturity date in 2025, 2027 and 2030. These bonds with fixed interest rates place us in a very good and strong financial position and positively impact our financial costs. I think you'll see that conclude the key points regarding the third quarter financial statement. Thank you.

Now we will continue to the dividend and talk a little bit on some questions that we received to other updates. With respect to our [indiscernible], we submitted an updated development plan to the [ CPA ] governments basically according to the guidelines that they inspect us, and we are expecting those to be approved and we are discussing with them once it's approved, will commit ourselves to go to a feed and then obviously, based on that to investment decision in the project. In parallel to that, on the license that we receive in Morocco, we basically gather all the 3D that have been done in the past in the license as well as 2D, and we are right now starting the process of reprocessing those 3D packages. It's a significant packages. As you can see, from 2009 to 2014, then '17, '18, very massive 3D campaigns, which we believe that contains a potential, so based on those reprocessing -- not reprocessing activities will strive to identify leads and prospects to be drilled. So that's from that perspective. On the dividend, I think one thing which is significant since the start of the production of Leviathan early 2020, we delivered $1 billion as a dividend to our shareholders, and we'll continue to maintain this dividend policy in parallel to investments in our coal assets in, let's say, in natural growth of our core assets as well working to create the next generation of investment for human energy such as the Morocco activity and all that with reserving a reasonable debt to NAV ratio, and this is where we are targeting. From our debt perspective and Tzachi touched, we currently don't see ourselves coming back to the market to any new bonds in the near few months. What we are seeing basically is we repay our next bullet from cash flow and from financing that we already have in place. But once we take investment decision on the second phase of the and we come to the market with an update this year which will take into consideration the significant upside of selling potentially 21 or more BCM here. In parallel to obviously, we hope to have a much quiet environment year in the conflict only then we're assuming that we'll come back to the market to top up the board structure, the LATAM bond structure that we already have. So potentially, you can see us in the market second half of 2025. So please, any additional questions, we are here to answer. If not, you always can call Guil Bashan day and night, any time he is available to you guys.

Especially night is good.

So don't hesitate and obviously, directly to the sales force. Don't try to object. Thank you very much. Thank you for joining us this afternoon. We really hope to see you in the next quarterly results. Obviously, we hope to see at least those results or better. So see you soon.

Thank you, everyone.