Nefta in 2025: Tamar Is Moving Ahead, but Shareholder Value Is Still Filtered on the Way Up

Getting to Know the Company

At first glance, Nefta looks like a simple listed vehicle for Tamar exposure. That is only partly true. In practice, it is a holding company with three distinct layers: effective control of Isramco Negev 2 alongside ownership of about 18.4% of its participation units, full ownership of Isramco Inc. in the US, and a smaller side portfolio of real estate, hotels, and technology investments through HNL. On the consolidated screen, everything looks large: NIS 2.27 billion of revenue, NIS 535 million of net profit, and a NIS 5.72 billion balance sheet. At the listed-shareholder layer, the picture is much less clean: only NIS 223 million of profit was attributable to Nefta’s shareholders, while NIS 312 million went to non-controlling interests.

That is the core of the 2025 story. What is working now is the core asset. Tamar remains the group’s main profit and cash engine, phase one of the production-expansion project was completed after the balance-sheet date, and Isramco Negev 2 still meets its financial covenants while keeping an ilAA rating with a stable outlook. But the active bottleneck is no longer whether the asset exists and works. The bottleneck is accessible value: how much of Tamar’s improvement can actually reach Nefta’s shareholder layer while the consolidated partnership keeps funding expansion, export infrastructure, and debt, and while a large share of the profit and cash flow still belongs to outside holders of Isramco Negev 2.

At the latest share price of NIS 26.31, Nefta’s market value is roughly NIS 2.6 billion. That number should be read against two different balance sheets: consolidated equity stands at NIS 2.94 billion, but equity attributable to the company’s shareholders is only NIS 1.36 billion. That is not an accounting quirk. It is a basic reminder that Nefta is not pure Tamar. It is Tamar filtered through a controlled partnership, debt, minorities, and royalty economics.

That is also why 2026 looks less like a breakout year and more like a bridge year operationally. Tamar is genuinely moving forward, but the stock will still be judged through three other questions: whether higher capacity actually turns into steadier sales, whether export growth advances without consuming even more capital, and whether the listed layer starts showing more accessible cash and less purely consolidated profit.

Four points worth understanding upfront:

• 2025 looks weaker against 2024, but a large part of the gap is normalization rather than a break in the core asset. In 2024 the company booked roughly NIS 140 million of net-of-tax other income from the sale of the Dor Gas override royalty, which made for a very high base.
• Fourth-quarter profit attributable to shareholders looked very strong at NIS 114 million versus NIS 37 million a year earlier, but it was also supported by roughly NIS 43 million of tax income from prior years, NIS 22 million of gain from loss of significant influence in an associate, and about NIS 10 million of fair-value uplift in investment property. That is not a clean read of operating acceleration.
• The parent company itself eliminated its own bond debt in January 2025. Yet the cash that really matters still sits inside Isramco Negev 2, where it remains subject to debt, covenants, and distribution constraints.
• Completion of Tamar phase one does not end the capex story. The Ashdod compressor upgrade is still unfinished, the Nitzana export line is aimed at the second half of 2028, and Tamar’s partners still have a large export-infrastructure bill ahead.

Events and Triggers

The Nefta story changed in 2025 less through the headline annual numbers and more through the order in which the next triggers are lining up. The report does not show an outright operational breakout. It shows a queue of events that can reshape the read over the next two to four quarters.

First trigger: phase one of Tamar’s expansion project was completed on February 9, 2026. That is a real milestone because it closes the stage that included the third pipeline from the wells to the platform and the related infrastructure. But even here the detail matters: as of the reporting date, the compressor upgrade at the Ashdod receiving facility was still unfinished, and only the combination of phase one plus that upgrade is expected to lift Tamar’s maximum daily production capacity to up to 1.6 BCF per day. In other words, capacity has moved forward, but full monetization of that capacity has not yet been proven.

Second trigger: the gas-sales agreement with Ksem Energy became effective on February 22, 2026 after all conditions precedent were met. The agreement is tied to a planned combined-cycle power station near the Ksem interchange, with commercial supply expected to begin in 2029, at up to roughly 0.8 BCM per year for five years or until early 2035, whichever is later. At the Tamar-partner level, that implies total potential revenue of about $700 million to $800 million. This is an important reinforcement of Tamar’s future demand base, but it does not solve the 2026 story. It supports the long-term demand case, not the immediate cash-flow line.

Third trigger: the Nitzana agreement package with NTAZ entered into force in October 2025, but this is a longer capital story than Tamar phase-one completion might suggest. The estimated budget stands at roughly $609 million for the full project, with Tamar partners’ share at about $255 million and Isramco Negev 2’s share at about $73 million. In addition, Chevron estimates about $64 million of excess cost in the compressor portion, of which Isramco Negev 2’s share is about $9.2 million. By year-end 2025, roughly half of the estimated budget had already been paid, and estimated completion remains the second half of 2028. Put differently, production capacity can improve before the next export route is truly ready.

Fourth trigger: sitting against that growth narrative is a pricing dispute that could pull in the opposite direction. In December 2025 the Israel Electric Corporation opened arbitration against all Tamar partners and asked, among other things, that the gas price for the minimum take obligation be cut by the maximum contractual 10% starting January 1, 2025. Tamar partners rejected the claims in January 2026. This is not a catastrophic threat, but it is exactly the kind of issue that makes the market ask whether Tamar is expanding operationally while price itself is facing pressure.

The annual base year also matters. Total Tamar gas sales were 10.05 BCM in 2025 versus 10.09 BCM in 2024. In the fourth quarter alone, volume fell to 2.15 BCM from 2.47 BCM mainly because of about 16 days of planned maintenance. So 2025 did not give investors the feel of an asset that had already broken into a higher run rate. It mostly gave them a line of upcoming catalysts that can change the picture once they start showing up in the reported numbers.

Efficiency, Profitability and Competition

The important point here is that 2025 was not a business breakdown. It was a story of price, FX, and an unusually high comparison base. Revenue fell from NIS 2.45 billion to NIS 2.27 billion, operating profit after the petroleum levy fell from NIS 999.7 million to NIS 668.9 million, and profit attributable to shareholders fell from NIS 337.7 million to NIS 222.7 million. That looks sharp, but the underlying drivers matter.

What really drove the drop

Revenue from oil, gas, and condensate net of royalties fell to NIS 1.645 billion from NIS 1.843 billion. Tamar alone declined from NIS 1.765 billion to NIS 1.583 billion net of royalties. Total volume barely moved, so this is not a demand-collapse story. The decline came mainly from a lower average gas price and a weaker dollar against the shekel. That is the difference between a superficial read and an economic read: Tamar did not sell much less. It sold into less favorable pricing and FX translation.

At the same time, not every line weakened. US oil marketing rose to NIS 423.5 million from NIS 401.9 million, and rental and asset-operation revenue rose to NIS 61.6 million from NIS 60.1 million. But this is where investors should avoid artificial diversification. Those lines add volume. They do not set the thesis. Tamar still sets the thesis.

The consolidated report is stronger than the shareholder layer

This is the point a first read can miss. Group net profit was NIS 535 million, but only NIS 223 million reached Nefta shareholders. In 2024, group net profit was NIS 768 million and NIS 338 million of that was attributable to shareholders. So even in years when Tamar works well, Nefta shareholders do not capture the full consolidated improvement.

That is exactly why Nefta requires holding-company discipline even if most of its reported economics look like an energy company. It consolidates Isramco Negev 2 because it effectively controls the general partner, but it owns only about 18.4% of the participation units. So Tamar’s profit and cash flow show up in a large consolidated number first and only later split apart. Any read that stops at the consolidated line risks assigning Nefta a cleaner earnings profile than the listed shareholder layer really has.

The fourth quarter looked too good

The fourth quarter invites a quick bullish reading. Profit attributable to shareholders jumped to NIS 114 million from NIS 37 million. But a large part of that jump came from items that should not be projected forward too mechanically: roughly NIS 43 million of tax income from prior years, around NIS 22 million of gain from loss of significant influence in a startup investment, and about NIS 10 million of investment-property revaluation. These are legitimate gains. They are just not the same quality as recurring Tamar operating earnings.

Competition and concentration

Tamar benefits from large demand anchors, and that is both a strength and a risk. The Israel Electric Corporation accounted for 42% of Tamar’s sales in 2025 and Egypt’s BOE added another 34%. That means the field sits on real anchor customers. It also means that each price negotiation, arbitration, or contractual adjustment with those two customers matters far more than it would in a broader customer base. In Nefta’s case, customer concentration is not just a commercial detail. It is part of the machine that determines Tamar quality and, by extension, stock quality.

That risk becomes more visible when customer concentration is combined with contract structure. IEC now has a price arbitration route. BOE has the right to reduce the annual Take or Pay quantity to 50% in calendar years when average Brent falls below $50 a barrel. So even contracts that look long-dated and stable still contain mechanisms that can alter the quality of revenue.

Cash Flow, Debt and Capital Structure

The right way to read Nefta is through an explicit all-in cash flexibility lens. That is the real story here. It is not enough to ask how much cash the group generated. The relevant question is how much cash remained after real investments, distributions, repayments, and operating commitments.

The group generated NIS 907.9 million of operating cash flow in 2025, or roughly NIS 864 million after interest paid. On the surface that looks strong. But the full picture is different: NIS 143 million went into oil and gas assets, NIS 350 million into distributions to non-controlling interests, NIS 400 million into the change in deposits, investments, and other receivables, and NIS 431 million into loan and bond repayment. By year-end, cash had increased by only NIS 77 million to NIS 468.6 million.

That is the difference between a business that can produce cash and a stock where that cash is truly free to the shareholder. At Nefta, the core asset still generates strong operating cash. What weighs on the listed equity is what happens immediately afterwards: debt, export infrastructure, and the minority layer.

The parent got cleaner, the layer beneath it did not

There is real good news here. In January 2025 the company fully repaid its own Series H bond. In addition, the report shows around NIS 463 million of financial assets at the parent and private-subsidiary level, plus about NIS 60 million representing the company’s share in trust-account cash from the former partnerships. In simple terms, the parent is no longer the immediate refinancing pressure point.

But that does not mean the shareholder is free. Isramco Negev 2, which is still the practical value layer of Tamar, ended 2025 with NIS 133.3 million of current debt, NIS 287.5 million of long-term bank debt, and NIS 977.7 million of long-term bonds. During the year it drew another $40 million from a bank facility and issued Series D bonds with NIS 420 million face value, raising net proceeds of about NIS 416.4 million at a 5.01% coupon. This is not a distress picture. It is also not a pure free-cash picture.

The reassuring side is that Isramco Negev 2 remains inside its financial guardrails. Both its loan agreements and bond indentures require minimum economic equity, capped net debt-to-EBITDA, and in some cases capped LTV. The report explicitly states that the partnership is in compliance. The debt rating also remained ilAA, and S&P Maalot revised the outlook to stable from negative in August 2025 because Tamar continued operating reliably.

The problem is not a tail event. The problem is distribution filtering. Under the bond indentures and financing agreements, distributions from Isramco Negev 2 are restricted if economic equity would fall below $800 million after the distribution, if leverage rises above the relevant threshold, or if other breach conditions are met. So even when Tamar works, Nefta shareholders do not own an automatic cash machine. They own an asset that can distribute cash only so long as the leveraged layer beneath it keeps enough headroom.

Value is created, but not all of it is accessible

The report is a useful lesson in separating created value from accessible value. Consolidated equity stood at NIS 2.94 billion, but equity attributable to shareholders was only NIS 1.36 billion. Non-controlling interests were NIS 1.58 billion. During 2025, Isramco Negev 2 declared total distributions of about NIS 446 million, of which about NIS 361 million was allocated to non-controlling interests.

The implication is straightforward: even if Tamar keeps generating earnings, not every improvement will hit Nefta’s shareholder layer with the same intensity. First it has to pass through the partnership layer, through the minority holders, and through distribution rules. That is exactly where a holding-company analysis needs to be stricter than a pure upstream asset analysis.

Outlook

This report justifies a forward read, but not a linear one. Nefta is not sitting at a trough waiting for recovery, and it is not sitting at a clean breakout point either. It is in a more demanding place than that: the core asset is moving ahead, but the translation into accessible value still has several tests to pass.

Five findings should drive the forward read:

• Tamar phase one is complete, but the export story will continue to absorb capital and time at least until the compressor upgrade is done and Nitzana progresses.
• 2025 was not a demand-collapse year. It was a year of worse pricing, a weaker dollar, and a very high comparison base.
• Anyone reading the fourth-quarter jump without stripping out tax, revaluation, and investment gains is likely to overstate the quality of the improvement.
• The parent company is stronger than before because its own debt is gone, but the stock is still tied to the leveraged and distribution-constrained machine of Isramco Negev 2.
• The US business is no longer just background noise. It is still too small to drive the thesis, but already large enough to dilute it if losses and provisions continue.

What has to happen at Tamar

The first test is technical but material: the Ashdod compressor upgrade has to be completed, and the move to up to 1.6 BCF per day has to show up not only in engineering capacity but in steadier actual sales. If upcoming reports show that the added capacity translates into more gas sold, especially into export channels, the story gets cleaner. If the capacity exists but remains blocked by export infrastructure, system bottlenecks, or security-related delays, the market is likely to stay skeptical.

The second test is infrastructural. Nitzana is not decoration. It is part of the route by which Tamar is supposed to convert capacity into gas sold outside the domestic market. But by the end of 2025 the project was already capital-heavy, excess costs were openly acknowledged, and completion remained targeted for the second half of 2028. So even after Tamar phase one, it is still too early to write a simple “the investment phase is behind us” story.

The third test is commercial. The Ksem agreement improves Tamar’s future customer base, but commercial supply is expected only in 2029. By contrast, the IEC arbitration sits much closer. That means the market is likely to assign more weight over the coming year to current Tamar pricing, actual export volumes, and arbitration outcomes than to long-dated demand contracts several years out.

What this means for 2026 and 2027

From Nefta’s standpoint, the next years look like operational bridge years, not breakout years. If things go right, they can lay the groundwork for higher sales, broader export flow, and a stronger contracted base. But on the path there are still three filters: capital spending, pricing disputes, and distribution constraints.

The practical implication is that investors should read the next reports in this order:

1. Is Tamar actually selling more gas, or only capable of selling more gas.
2. Is export infrastructure moving ahead without another meaningful cost step-up or delay.
3. Is Isramco Negev 2 still able to distribute cash without narrowing covenant headroom too far.
4. Is the US business stopping its flow of impairments, legal provisions, and doubtful-debt noise.

If all four begin to line up, Nefta’s read improves meaningfully. If only the first does while the rest remain open, investors will still own a good asset story with a less clean equity story.

Risks

The first risk is price pressure around anchor customers. IEC represents 42% of Tamar sales and BOE another 34%. That concentration provides operating stability, but it also makes each arbitration, price update, and contractual change much more material. This is especially true with IEC now in arbitration, and it is also true with BOE, where the Take or Pay annual volume can be cut if Brent falls below the relevant threshold.

The second risk is execution and capital intensity. Tamar is moving forward, but Nitzana, export upgrades, guarantees, and equipment still require both money and time. Isramco Negev 2 posted about NIS 86 million of bank guarantees and about NIS 60 million of partnership guarantees for Nitzana. The company also states explicitly that a prolonged regional conflict could delay project completion and raise costs. This is exactly where a good energy story can become a slower and more expensive infrastructure story.

The third risk is structural. Even if Tamar continues to operate very well, Nefta shareholders do not automatically receive the full benefit. As long as most of the earnings sit inside a consolidated layer with a large minority interest, as long as distributions are subject to equity floors and leverage tests, and as long as value rises first inside Isramco Negev 2 and only then maybe at Nefta, a structural discount remains part of the picture.

The fourth risk is the US exposure. Isramco Inc. ended 2025 with an operating loss of about NIS 10 million after an approximately NIS 18 million legal provision, roughly NIS 10 million of doubtful-debt provisioning, and around NIS 15 million of oil-and-gas impairment. At the same time, the company is evaluating a Texas natural-gas-liquids separation project with an estimated total cost of about $100 million, of which Isramco Inc.’s share would be about 66.66%, while already extending a $4.5 million loan to a local partner secured by land. This is not existential, but it is a clear potential source of further capital drain and distraction.

The fifth risk is FX. The weaker dollar already hurt 2025 revenue and financing results. Some of the debt exposure is hedged, but not all of it. As long as Nefta sits on a mix of dollar revenues, shekel debt, shekel-based tax effects, and capex items that do not move in lockstep with revenue, currency remains capable of distorting the operating read.

Conclusions

Nefta exits 2025 with a better core asset than the drop in reported profit might suggest, but with a more complicated equity story than Tamar phase-one completion might imply at first glance. What supports the thesis is an active Tamar field, a cleaner parent balance sheet, and a stable credit read at the partnership layer. What blocks a cleaner thesis is a double filter: the translation from capacity into monetization is still slow, and the translation from consolidated profit into accessible shareholder value is still partial.

Current thesis: Nefta is a filtered and leveraged way to own Tamar. The asset is improving operationally, but stock quality will be determined by how much of that improvement reaches the shareholder layer after minorities, debt, and export-infrastructure spending.

What changed versus the prior understanding: the story has shifted from a question of Tamar’s basic stability to a question of monetization and accessibility. 2025 showed that the core asset still works, but also that consolidated profit matters less without a bridge to the shareholder layer, and that Tamar’s expansion is not the end of the investment phase but the beginning of a new one.

Counter thesis: it is fair to argue that the market is getting too tangled up in the structure, and that in the end Tamar will keep generating cash, capacity will increase, contracts will deepen, and the parent company is already much less pressured. That is a strong counterpoint. The problem is that it still assumes a smoother path from the field to the listed shareholder than the current report actually proves.

What could change the market’s interpretation in the short to medium term: proof that 1.6 BCF per day turns into actual sales, cleaner progress on Nitzana without another meaningful cost step-up, a reasonable outcome in the IEC arbitration, and continued distributions from Isramco Negev 2 without visible erosion in financial headroom.

Why this matters: in Nefta’s case, the question is not only whether Tamar creates value. The real question is whether that value can move through the partnership and holding-company layers and remain clean value for the listed shareholder.

Over the next two to four quarters, Nefta needs to prove three things at once: that higher Tamar capacity translates into actual sales, that export growth does not turn into a deeper capital sink, and that shareholders of the listed company see more real cash and less purely consolidated accounting. If one of those three pillars fails, the asset story can still remain good while the stock story remains less clean.