NewMed in 2025: Leviathan Is Stronger, but Unitholders Are Already Entering a New Investment Cycle

Company Overview

NewMed is no longer a scattered exploration story that can be read through a list of licenses. Economically, it is first and foremost Leviathan. The 45.34% stake in the field drives the cash flow, most of the revenue, and the reason the market values the partnership at roughly ILS 21.2 billion. What is working right now is not hard to see: Leviathan is still selling gas into Israel, Egypt, and Jordan, production resumed after the 2025 interruptions, the third gathering line was completed in early March 2026, and the first phase of the expansion to 21 BCM per year already has FID.

The easy mistake in a surface read of 2025 is to think the bottom line, which fell from $524.6 million to $343.0 million, tells the whole story. It does not. There was real pressure in both price and volume: the average realized price fell from $6.12 per MMBTU to $5.58, and Leviathan sales volumes slipped from 11.2 BCM to 10.9 BCM. But net profit also absorbed a much heavier accounting hit than a quick read suggests: roughly $76.4 million from the Vinekh dry hole in Bulgaria inside depreciation, depletion and amortization, plus a $15.0 million loss from discontinued operations tied to legacy Tamar settlements. So 2025 was weaker, but not because Leviathan stopped being a good asset.

The active bottleneck has also moved. The question is no longer mainly whether Leviathan can generate cash at the field level. The more important question is how much of that value will actually reach unitholders after a new investment cycle, greater reliance on bank funding, and a change in the effective share of revenue that flows to equity holders. That is where one of the report's most important points sits: the partnership estimates Leviathan's investment payback point will arrive in the first half of 2026, and after that point the effective participation rate of equity holders in Leviathan revenues falls from 37.63% to 35.37%. That does not erase Leviathan's value. It does mean that value created at the field level and value accessible to unitholders are not the same thing.

It also matters what NewMed is not. This is not a thinly traded participation unit under technical pressure. The latest daily trading volume was around ILS 49.9 million, while short interest as a percentage of float stood at just 0.11% with an SIR of 0.37, both below the sector average. In other words, the market is not running an immediate solvency debate here. It is running an execution, funding, and geopolitics debate, with a sharper focus on what kind of economics will still be left for unitholders as the partnership moves from a relatively comfortable harvest phase into a heavier capex phase.

The asset map behind the thesis

That chart captures the heart of 2025. The operating engine remained large and profitable, but the bridge from sales to EBITDA and then to net profit became much less clean. That is where most of the year's analytical interest sits.

Events and Triggers

Leviathan moved from an operating update into a new strategic phase

The most important event did not happen inside 2025 itself, but immediately after year end. On January 15, 2026, all conditions precedent were met for the amended Egypt export agreement, and on the same day the Leviathan partners took FID on the first phase of the expansion project. This is much more than another capex headline. The first phase is designed to lift total production capacity to roughly 21 BCM per year, with a total budget of about $2.36 billion on a 100% basis, and it includes 3 additional wells, more subsea systems, and expanded processing capacity on the platform. First gas is expected only in the second half of 2029, so this does not improve 2026 earnings directly. It does materially change the growth profile, the infrastructure depth, and the funding needs.

On March 1, 2026, the third gathering line was also completed. That project is meant to support a rise in current production capacity to roughly 14 BCM per year. In the fourth quarter presentation, the partnership highlighted roughly $90 million of savings versus the approved budget. That matters for two reasons. First, it shows execution discipline. Second, it slightly eases the pressure going into the much larger expansion budget. But there is still a caveat: the partnership itself said system performance would be evaluated once production resumes. So even this engineering milestone does not make the story fully "done."

2025 was a reminder that geopolitics can move straight into the P&L

During the second quarter, from June 13 to June 24, 2025, Leviathan production was shut down in the context of the "Roaring Lion" military operation. According to the board report, the interruption caused around $33 million of lost gross gas and condensate revenue and lost overriding royalties, with about a $20 million effect on net profit. On top of that, the same quarter also included roughly 11 days of planned work related to the third gathering line alongside routine maintenance. The point is straightforward: even when the field is operating well, production and export are not insulated from regional realities.

That risk did not stay theoretical after the balance sheet date either. As of the report approval date, Leviathan had already gone through another 16 non-producing days because of "The Lion's Roar." The partnership estimated there was no material cumulative effect on the overall discounted cash flow value at that stage, but the mere fact that this question came up again within less than a year is a clear warning sign: NewMed does not mainly have a demand problem. It has a potential continuity and geopolitical problem.

Bulgaria stepped down as a free narrative and stepped up as a real test

On January 21, 2026, the sale of 10% of the Bulgaria license to BEH was signed and completed, leaving the ownership structure at 45% NewMed Balkan, 45% OMV Bulgaria, and 10% BEH. At the NewMed level, this does not turn Bulgaria into a core asset. But it does bring two tangible positives: BEH is reimbursing 10% of costs incurred since January 1, 2021 in connection with drilling preparations, and NewMed Balkan's commitment on the first two wells fell from EUR 100 million to EUR 90 million in total, or from EUR 50 million to EUR 45 million per well.

Still, the broader picture did not become cleaner. In early February 2026 the partnership reported that Vinekh had reached total depth with only insignificant gas shows and was assessed as a dry hole. Days later the total cost of the well, including plug and abandonment, was updated to about EUR 86 million on a 100% basis, with NewMed Balkan's share at about $76 million. That is the same amount that flowed into the 2025 write-off. Bulgaria therefore remains optionality, but it is no longer a "free" narrative. Krum is now the next checkpoint, not a bonus that can be counted in advance.

That mix matters because it highlights two things at once: Egypt still dominates the commercial picture, but 2025 did bring a mild shift away from Egypt and toward Israel and Jordan. That does not remove export dependence. It does show that Leviathan has a somewhat broader regional demand base than a single export headline implies.

Efficiency, Profitability and Competition

The core insight here is that the business itself stayed efficient, but the quality of profit deteriorated. Net revenue fell 10.94% to $866.6 million. At the same time, cost of production actually declined 11.1% to $149.7 million, helped in part by lower gas transportation costs into Egypt. In other words, the pressure did not come from a loss of control over the operating engine. It came from a combination of weaker pricing, slightly lower volume, and a much heavier depreciation, depletion, and write-off burden.

That becomes especially clear when the margin story is split into price, volume, and mix. Price: average realized price fell from $6.12 per MMBTU in 2024 to $5.58 in 2025 because Brent was lower. Volume: gas sold from Leviathan declined from 11.2 BCM to 10.9 BCM, almost entirely because of the second quarter, when a security-related shutdown and planned project work hit the same window. Mix: condensate sales actually rose to roughly 857 thousand barrels worth about $45.2 million on a 100% basis, up from roughly 561 thousand barrels and $37.0 million a year earlier. That cushioned part of the pressure, but not enough to offset it.

The real deterioration sat further below the gross line. Depreciation, depletion and amortization jumped from $80.7 million to $171.5 million. That is close to the center of the gap between a business that still generated $684 million of EBITDA and a net profit line that fell to $343 million. Inside that jump sit the Vinekh write-off, updated abandonment liabilities at Yam Tethys, and a larger Leviathan depletion base.

Readers are especially likely to miss this in the fourth quarter. Net revenue in the quarter was down only 3.79% to $218.1 million, while volumes actually rose from 2.73 BCM to 2.82 BCM. Condensate sales also increased. And yet net profit collapsed from $119.5 million to $16.9 million. Why? Because DD&A in the quarter jumped to $103.5 million from $16.8 million a year earlier, and the quarter also absorbed a $15.0 million discontinued-operations loss tied to Tamar. This is a classic case where looking only at net profit can blur the difference between an operating problem, a cyclical pricing problem, and a more one-off accounting and exploration hit.

Customer concentration is another key part of the quality-of-profit discussion. NewMed does sell into a regional market, but dependence is still very clear:

The good news is that all receivables had been collected by the report approval date. The less comfortable part is that the partnership itself notes the regional security and economic backdrop has increased credit risk. So even with strong collection history, customer identity still matters to the risk read.

From a competition angle, NewMed is not mainly competing in the way a typical industrial name might. The real competitive layer is access to infrastructure, reliability of supply, and the ability to hold large regional customers inside long-term arrangements. So the right question is not simply whether Leviathan has a moat. The better question is whether NewMed can convert a strong geological asset into durable commercial and cash economics. 2025 showed that it still can, but it also showed how quickly the gap between those two layers can narrow.

Cash Flow, Debt and Capital Structure

Cash generation is still strong, but cash generation is not the same thing as cash flexibility

On a normalized cash-generation basis, NewMed still looks solid. Operating cash flow was $505.4 million in 2025, down from $577.5 million in 2024. That is a decline, but not a collapse. It mainly reflects the lower net profit and lower revenue base, partly offset by non-cash adjustments and some improvement in working capital.

The picture looks less clean once the frame shifts to all-in cash flexibility. Investing cash flow was positive at $27.9 million, but not because the partnership barely invested. It was mainly because it pulled down short-term deposits. At the same time, financing cash flow was negative $476.8 million and included $240.3 million of distributions plus $511.5 million of Leviathan Bond buybacks and repayment, partly offset by a $275 million bank loan.

That is exactly why the cash line on its own can mislead. Cash and cash equivalents rose from $51.2 million to $107.7 million, but short-term deposits fell from $333.3 million to $49.8 million. If cash, short-term deposits, and long-term deposits are combined, the picture is a drop from roughly $385.0 million at the end of 2024 to roughly $158.3 million at the end of 2025. Anyone looking only at the cash line will see improvement. Anyone looking at the full cash picture will see that the cushion is already much narrower.

Covenant room is wide, but funding dependence is rising

To NewMed's credit, this is not a partnership that looks close to the wall on covenants. The ratio of asset value to net financial debt stood at roughly 5.02, well above the minimum threshold of 1.5 at net financial debt below $2.5 billion. Solo liquidity stood at roughly $382.7 million versus a minimum requirement of $20 million. Total financial debt was around $1.4 billion against a ceiling of $3.0 billion. So as of year end 2025 and the report approval date, the partnership does not look like it is operating near a covenant edge.

But that is not the whole picture. On February 17, 2026 NewMed signed two new Leumi facilities totaling $500 million: Facility A for $100 million at a fixed rate of 5.45% to 5.85%, and Facility B for $400 million at Term SOFR plus 2.3% to 2.4%, with one year of availability and final maturity on June 30, 2032. The partnership explicitly said the facilities were meant both for ordinary operations and for the Leviathan expansion. In the investor presentation released with the annual results, it also said that $600 million of undrawn bank facilities remained available as of the financial statement publication date.

The economic meaning is two-sided. On the positive side, the partnership is entering the new capex cycle with meaningful bank support. On the negative side, it is increasing its exposure to variable-rate debt and to funding availability at exactly the stage when Leviathan capex moves to another level. This is not a "tomorrow morning" risk. It is a risk to the quality of the next cycle.

There is also one external warning signal worth surfacing. The new credit documentation includes, among other events of default, a prolonged Leviathan production halt caused by war or terror of 180 days or more, where it has or is reasonably likely to have a material adverse effect. Again, this does not look close to happening. But it sharpens an important point: even with wide ratio headroom, the funding structure itself still assumes continuity of Leviathan production.

Leviathan's value has gone up, but the unitholder take rate has not gone up in the same way

This may be the single most important analytical point in the filing. After FID, the discounted cash flow value of the partnership's share of Leviathan 2P reserves at a 10% discount rate rose from roughly $4.95 billion at the end of 2024 to roughly $5.99 billion at the end of 2025. At a 7.5% discount rate the increase was similarly sharp, from roughly $6.02 billion to roughly $7.53 billion. That is a strong number, and it validates the idea that Leviathan benefited both from reserve additions linked to FID and from the higher planned production profile.

But this is exactly the place to stop and avoid a metric-above-equity-holder trap. The same disclosure set also includes the partnership's estimate that Leviathan's investment payback point will be reached in the first half of 2026. Once that happens, the effective participation rate of equity holders in Leviathan revenues falls from 37.63% to 35.37%. In other words, the asset becomes more valuable, but the take rate available to unitholders gets smaller.

That is not a bearish argument. It is an analytical discipline point. With NewMed, four layers need to be separated: geological value, project-level value, partnership-level cash flow value, and the value actually accessible to unitholders after royalties, debt, and the next funding cycle. 2025 and early 2026 improved the first two. They did not improve the fourth to the same degree.

Forecasts and Outlook

Before getting into the detail, four non-obvious findings should frame the forward read:

• 2026 through 2027 looks less like a simple continuation of Leviathan's harvest years and more like a transition from an existing cash engine into a funded build-out cycle.
• The engineering bottleneck at Leviathan has eased with the third gathering line, but the commercial, geopolitical, and financing bottlenecks remain open.
• The uplift in Leviathan's value after FID does not roll one-for-one into unitholder value because the payback point changes the effective revenue participation rate.
• Bulgaria and Aphrodite add strategic depth, but for now they are optionality, not the base case that pays for 2026.

The right name for the coming year is probably a transition year. It is not a breakout year, because the real capacity step-up will arrive only if the expansion proceeds to plan into the second half of 2029. It is not a reset year either, because Leviathan still generates high EBITDA, serves regional customers, and enters the next phase from a position of relative strength. It is a transition year because the story is shifting from "how much cash does Leviathan generate now?" to "how does NewMed fund the next step without damaging the quality of value that reaches unitholders?"

Over the next two to four quarters, the market is likely to focus on four checkpoints. First: continuity of Leviathan production and export, especially after two interruptions within less than a year. Second: how the partnership uses its available credit lines and whether it needs to deepen leverage or turn to other funding alternatives. Third: practical progress on export infrastructure. The partnership is presenting a pathway that includes Ashdod-Ashkelon capacity in the third quarter of 2026, FAJR and compression in the second half of 2026, and Nitzana in 2028. Fourth: whether Krum in Bulgaria gives the non-Leviathan story some real support, or whether the news flow outside Leviathan remains mostly expenditure.

Aphrodite also deserves attention, but in the right proportion. The partnership reported the start of FEED for production and transmission systems and commercial discussions with the Egyptian government around a Host Government Agreement and a GSPA term sheet for all resources covered by the approved development plan. That is positive, but it does not carry 2026. Aphrodite still sits in the "could matter later" bucket, not the "pays the bills now" bucket.

From a market-interpretation point of view, the setup is fairly clear. Positive near-term surprises would come from better-than-feared production continuity, disciplined use of credit lines, and visible progress on export capacity. Negative surprises would come from delays, more expensive funding, or another round of extended production interruptions. The very low short interest suggests the market is not looking for a technical squeeze or collapse. It is looking for execution proof.

Risks

Asset and customer concentration: NewMed is effectively Leviathan, and Leviathan itself is highly dependent on two major customers, Blue Ocean Energy and NEPCO, which together represented 83% of 2025 sales. That concentration is both a moat and a weakness. When everything works, it reflects large and sticky contracts. If a regulatory, geopolitical, or commercial issue emerges, there are not many layers of diversification to absorb it.

Geopolitics is not a footnote: The June 2025 shutdown and the February 2026 shutdown show the security risk is not just standard filing language. More importantly, the new credit documentation already brings production continuity into default mechanics. That does not make funding risk imminent, but it does mean the weakest link in the story is not only price. It is also supply continuity.

Gas pricing is not insulated from Brent: The decline in average realized price in 2025 was mainly driven by lower Brent because part of the gas pricing formula is linked to oil. So NewMed is not purely a volume story. The same asset, the same infrastructure, and the same customers can still produce weaker profitability if the external pricing backdrop softens.

A new investment cycle raises funding sensitivity: NewMed does not look stretched on covenants, but the combination of Leviathan expansion, new credit lines, and higher use of bank debt means the story is more exposed to cost of capital and funding availability. A partnership that distributed $250 million in 2025 while moving into heavier capex cannot afford to confuse accounting profitability with real financing flexibility.

Outside Leviathan, there is still no clean second base: Vinekh has already moved through a full write-off, and the annual report notes that no deferred tax assets were recognized for tax losses in the Bulgaria and Morocco subsidiaries. That is another sign that the non-Leviathan portfolio remains at a stage where it is hard to assign it economic weight comparable to the core asset.

Conclusions

NewMed exits 2025 with a stronger core asset, but with a less straightforward unitholder story than before. Leviathan has moved forward: the third gathering line is done, FID is in place, and the pathway to 21 BCM looks much more real. At the same time, 2025 was a reminder that the path from geological value to value that actually reaches unitholders runs through price, geopolitics, funding, and royalties.

Current thesis: NewMed remains one of the stronger regional energy platforms on the exchange, but the story has shifted from harvesting an existing asset to funding its next layer.

What changed versus the simple 2024 read is not that Leviathan weakened. It is that the economics for unitholders became less direct. Leviathan's value rose after FID, yet the effective participation rate in revenues is set to fall after the payback point, and the partnership already has to think more like the funder of an expansion than like the cash distributor of an operating field.

Strongest counter-thesis: The caution may be overstated. Net debt stayed stable, covenant headroom remains very wide, $600 million of undrawn facilities was still available as of publication, and the third gathering line plus FID may ultimately extend Leviathan's cash engine in a way that still supports unitholders even after the lower effective participation rate.

What could change market interpretation in the short to medium term? First, production and export continuity. Second, the shape of expansion funding. Third, whether the non-Leviathan news flow, especially Krum and Aphrodite, starts to look like real depth rather than just a menu of options.

One line on why this matters: anyone who confuses field-level value with value accessible to unitholders can end up valuing Leviathan correctly but valuing NewMed incorrectly.

For the thesis to strengthen over the next two to four quarters, NewMed needs to show three things at the same time: Leviathan runs with better continuity, expansion funding stays under control without becoming too expensive, and the non-Leviathan portfolio stops consuming capital without adding real depth. What would weaken the thesis is another round of extended interruptions, a jump in funding cost, or signs that too much of Leviathan's future economics is being traded away through expensive financing just to fund the next stage.