Australian drilling giant Woodside Energy has signed a non-binding agreement with the partners in the Leviathan gas field to acquire 25 percent of the reservoir 130 km. west of Haifa for roughly $2.71 billion.

After months of anticipation, Woodside signed a memorandum of understanding with the partners – Houston-based Noble Energy, and Israeli concerns Delek Drilling, Avner Oil Exploration and Ratio Oil Exploration – late Thursday night, which the Australian firm said “provides a framework to negotiate in good faith” the 25% acquisition via a fully termed agreement by March 27.

The latest memorandum of understanding builds upon an agreement in principle among the parties in December 2012, which had called for Woodside to acquire a 30% stake in the reservoir.

With ample hydrocarbon supplies for decades of domestic use and export, Leviathan is estimated to contain about 535 billion cubic meters (18.9 trillion cubic feet) of natural gas and 34.1 million barrels of liquid condensate.

Ahead of Woodside’s probable entrance as a stakeholder in March, Noble Energy holds 39.66% of the Leviathan field, Delek Group subsidiaries Delek Drilling and Avner Oil Exploration each have 22.67% and Ratio Oil Exploration owns 15%. Assuming the final agreement is concluded as planned, Woodside will hold 25%, Noble Energy will own 30%, Delek Drilling and Avner will each own 16.93% and Ratio will hold 11.12%, according to a report Delek Drilling submitted on behalf of the partners to the Tel Aviv Stock Exchange.

Woodside would operate any liquefied natural gas development for the reservoir, but Noble Energy will remain the exploration operator, according to a Woodside press release about the new understanding.

The parties have agreed upon a series of conditional payments to be made by Woodside, assuming they sign the full-fledged agreement.

Upon completion of the transaction under a fully termed agreement, Woodside would provide an initial payment of $850 million. The company would also pay $350m. upon a final investment decision on LNG development, or payments of up to the same amount on predetermined export project milestones, the information from Woodside said.

In addition, the company has agreed to pay 5.75% of its export revenue – or up to $1.3b. – to the partners once at least 2 trillion cubic feet have been exported from the field. Woodside would pay 2.5% in royalty fees to the partners for commercial oil production if hydrocarbons are found and produced from the reservoir prospects in the Mesozoic layer, the company added.

Finally, the Australian firm would commit to a one-time payment of $50m. if after production of 4 trillion cubic feet, an independent expert determines that the estimated gross gas resource is equal to or greater than 20 trillion cubic feet.

All of the aforementioned transactions included in the memorandum of understanding are conditional, however, upon the execution of the full-termed agreement as well as policy, tax and regulatory approvals from the Israeli government, the material from Woodside stressed.

Woodside CEO Peter Coleman said the understanding provides a potential commercial outcome with “compelling value.”

“We look forward to the ongoing engagement with the joint venture, government and other stakeholders to move forward with the Leviathan project,” Coleman said.

Woodside’s entrance into the partnership would bring the reservoir to a nominal value of $10.8b., compared to the $8.3b. value estimated in December 2012, the current partners said.

“The introduction of Woodside to the partnership reflects the great confidence that the international company has in the State of Israel and in the potential of the Leviathan reservoir, as well as its desire to achieve significant additional value from the basin,” the partners said.

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