Delek Drops as Clean-Gas Plan Hurts U.S. Stock: Tel Aviv Mover

Delek Group Ltd. (DLEKG) fell the most in a month in part on investor concern that proposed U.S. environmental standards may hurt profit margins at the Israeli company’s U.S. energy affiliate.

Shares of Delek Group, whose interest include stakes in Israel’s biggest natural gas field known as Leviathan, dropped 2.9 percent to 986 shekels, the biggest decline since March 6, at the close in Tel Aviv. The stock was the largest decliner on a percentage basis on the TA-25 (TA-25) Index, which fell 0.8 percent.

Delek US Holdings Inc. (DK) plunged almost 10 percent since the U.S. Environmental Protection Agency proposed standards on March 29 to cut the amount of sulfur in gasoline by two-thirds by 2017. The move stoked bets costs of fuel producers may rise to comply with the regulations. Netanya, Israel-based Delek Group has declined 3.4 percent in the past two trading days.

Delek Group shares are falling due to the weakness in the U.S. affiliate’s stock and on uncertainty over Woodside Petroleum Ltd. (WPL)’s planned investment in Leviathan, Roni Biron, an analyst at UBS Securities Israel Ltd., said by phone today.

Woodside agreed in December to acquire 30 percent of the Israeli gas field, an investment that may prompt Royal Dutch Shell Plc (RDSA) to sell the rest of its stake in the Perth, Australia- based company, Commonwealth Bank of Australia said on March 27. The headlines “raise concerns regarding Woodside’s investment in Leviathan,” Biron said. “I wouldn’t jump to the conclusion that Woodside will cancel the Leviathan deal because of Shell.”

Gas Flows

Delek Group shares have advanced 13 percent this year, after climbing 22 percent in 2012, in anticipation of the start of gas flow from the Tamar natural gas field in Israel, in which the company owns stakes via Delek Drilling-LP (DEDRL) and Avner Oil Exploration LLP. (AVNRL)

The field started producing gas for local consumption on March 30. The larger Leviathan site is set to initiate output in 2016, Noble Energy Inc., a partner in the field, said in December.

Assaf Ginzburg, chief financial officer of Delek U.S. Holdings, downplayed the potential impact of the proposed U.S. sulfur rules. “For small companies like us the EPA regulation is immaterial,” he said in an interview with Bloomberg in Tel Aviv today. “Over all, the sector is under pressure because margins are coming down and because of the new proposed regulation on gasoline. But business is still very healthy.”

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net

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