Energy sector dominates Tel Aviv Stock Exchange with over 200% return in 3 years

by | Apr 4, 2023 | Portfolio Management | 0 comments

The Tel Aviv Oil and Gas index has experienced a significant return in the past three years, providing investors with triple-digit returns since the outbreak of the Covid-19 pandemic that led to a decline in energy prices globally.

A combination of events contributed to the increase in the price of gas and oil, such as the quick exit from the epidemic, global shortages caused by supply chain delays, and the Russia-Ukraine war. Last week, the announcement of the investment by British Petroleum (BP) and the Abu Dhabi National Oil Company (ADNOC) in the Israeli gas partnership NewMed Energy (formerly Delek Drilling) led to the index achieving a decade-high record and an impressive return of 216% over the past three years, surpassing yields of Tel Aviv 35 & Tel Aviv 125 (35% and 40% respectively).

The report on this deal has fuelled the Tel Aviv Oil and Gas Index, which has increased over 15% within a week, making it the only index among the Tel Aviv Stock Exchange indices to show not only a positive, but a double-digit return since the start of the year. The foreign energy giants will acquire 50% of NewMed, currently controlled by the Delek Group, for NIS 14.2 billion, which is 70% higher than the market price at the time of the announcement. Though still subject to approval, as NewMed Energy owns 45% of the Leviathan gas reservoir, a successful closing of the deal will confirm Israel’s leading role in the energy sector in the region.

Compared to other indices, such as the Tel Aviv 35 and Tel Aviv 125, the energy sector has provided a dream return of over 200% over the last three years. Companies and partnerships, including Delek Group, NewMed, Ratio Petroleum, Isramco, Energian, Navitas, and others, have benefited, along with their controlling owners. In addition, NewMed, Ratio Petroleum, and Chevron have reaped the benefits of owning a stake in Leviathan, Israel’s largest gas reservoir, which produced massive profits in 2022.

For instance, NewMed’s revenues rose by 29% and amounted to $972 million, while the bottom line saw a significant improvement, with the net profit reaching $469 million. The Delek Group recorded a profit of nearly NIS 4 billion, an increase of 177% compared to the previous year, mainly due to a significant improvement in the results of the subsidiary Ithaca Energy, which coordinates the group’s oil and gas activities in the North Sea. The Ithaca IPO in London last November, was completed at a value of $2.9 billion, which allowed the Delek Group to improve its financial strength significantly.

The CEO of Delek Group, Idan Wallace, predicted that the strong demand for gas and oil in Israel, the Middle East, and Europe will continue to have a positive impact on the group’s performance in 2023. Ratio Petroleum, another Israeli partner in the Leviathan reservoir, also experienced a significant improvement in its business results last year, with revenues rising to $380 million, mainly due to the increase in the production of the Tamar reservoir.

In conclusion, the Tel Aviv Oil and Gas Index’s impressive return in the last three years is the result of various events that boosted the demand and price of gas and oil globally, along with the investment of BP and ADNOC in the Israeli gas partnership NewMed Energy. The energy sector has provided a dream return not only for companies but for investors, making it the most profitable sector in the Tel Aviv Stock Exchange.


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