Ratio Energies (Finance) 2025: The Bond Rests on Leviathan, While the Royalty Is Only a Backstop

Company Overview

Ratio Energies (Finance) is not another energy company, and it is not a clean direct way to buy Leviathan exposure either. It is a dedicated bond issuer, wholly owned by Ratio Energies, whose only real role is to raise debt and pass the proceeds back to the partnership through a Back-to-Back loan. Anyone reading these statements as if they belong to a standalone operating business misses the core of the story immediately.

What is working now? The asset underneath the structure is still large, active, and cash-generative. In 2025 Leviathan sold about 10.89 BCM of gas and about 856.75 thousand barrels of condensate, while Ratio Energies reported roughly $335.0 million of revenue and about $217.4 million of EBITDA. January 2026 already brought the effectiveness of the amended Egypt export agreement and the final investment decision for the first stage of the Leviathan expansion. On March 1, 2026, the third pipeline was completed. Those are real improvements to the forward cash-generation path. This is also a more opaque market read than usual: the company is a bond-only issuer, there is no tradable equity layer here, there is no short data, and the bond itself is unrated.

But the thesis is still not clean. At the issuer level, year-end equity was only about $560 thousand on an $80.7 million balance sheet, and the full-year net profit was just $113 thousand. That is not the profit of a growing business. It is almost entirely the result of a lower expected credit loss reserve. At the same time, February 2026 already reminded the market how dependent the whole structure remains on Leviathan's operating continuity, because at the time the statements were approved the field had already been shut for 23 days and management still could not estimate the net cumulative impact.

The easiest point to misread is the collateral. On paper, investors see a pledged 12% royalty calculated against 10% of Leviathan. That sounds strong. It is only half the truth. In practice, royalty cash is meant to flow only if the loan is not repaid by final maturity or if an acceleration event occurs, and even then only after state royalties, overriding royalties, and current payments to the financial institutions funding Leviathan. In other words, this is stress-case protection at the end of the chain, not a current coupon-support mechanism.

That is also where the active bottleneck sits. The real story of Ratio Energies (Finance) between 2026 and 2029 is not whether the issuer can manage itself. It is whether Leviathan stays online, whether export routes keep working, and whether the capacity expansion advances without stretching the financing layer above the asset too far. If those answers remain positive, the bond can read well. If one of those pillars stalls, the issuer has no second engine.

This chart is the right place to start because it exposes the illusion. Income and expense almost mirror each other. Profit did not improve because the business suddenly found operating leverage. It improved because the IFRS 9 reserve fell from about $581 thousand to about $468 thousand.

Events And Triggers

January and March 2026 strengthened the capacity side

The first trigger: on January 15, 2026, all conditions precedent for the Egypt export amendment were satisfied. On the same day, Leviathan partners took the final investment decision for the first stage of the Leviathan expansion. That phase is designed to lift total gas-production capacity to about 21 BCM per year, with first gas expected in the second half of 2029 and a total budget of about $2.36 billion on a 100% basis.

The second trigger: on March 1, 2026, the third pipeline was completed. Until then, this had been a meaningful operating promise that kept slipping because of the security backdrop. Once completed, the move from 12 BCM to 14 BCM of capacity stopped being a plan and became installed capability. That does not mean every additional molecule is already monetized, but it does mean part of the debate shifts from "can it be done" to "how much can now be captured".

The third trigger: the banks are already inside the story in a major way. In May 2025, Leviathan completed a refinancing package with a $600 million facility, of which $450 million was drawn and used mainly to refinance the previous loan. So the partnership did not enter the expansion period relying only on the Tel Aviv bond market and on Ratio Energies (Finance). It entered with a renewed bank layer extending to July 2031.

This chart is the heart of the forward read. Series D amortizes gradually through 2029. Over exactly that horizon, Leviathan is supposed to move from 12 to 14 and then to 21 BCM. So the question is not only whether the partnership will generate cash, but whether it can do so on the right timetable relative to the bond's amortization path.

2025 also proved the negative side

In June 2025, when Operation Rising Lion began, Leviathan was shut until June 25. Lost revenue at the project level was estimated at about $12 million gross before royalties, and the operator issued force majeure notices to customers. That matters because it shows this is not a theoretical risk tucked away in a boilerplate risk section. It is a risk that already materialized.

That is also what made February 2026 more serious. At the time the annual statements were approved, production had already been halted for 23 days following Operation Roaring Lion, and the partnership still could not estimate the net cumulative impact. Anyone looking for a neat "royalty-backed bond" with infrastructure-like smoothness needs to remember that the platform itself can be shut by security-driven regulatory instruction.

Why the near-term market read starts with continuity, not with accounting

The company complied with all trust-deed conditions, and no grounds existed for immediate repayment. The board also reviewed the warning-sign framework and concluded that no dedicated forecasted cash-flow disclosure was required. That is real confirmation that, at the reporting date, there was no obvious formal credit breach.

But the absence of a formal warning sign is not the same as the disappearance of risk. The near-term market read will focus first on stable production, then on export infrastructure execution, and only afterward on the comfort of the annual report itself. At the credit level, operating continuity matters more than the legal elegance of the Back-to-Back structure.

Efficiency, Profitability, And Competition

The issuer's profitability is barely operating profitability at all

This is where the headline can easily mislead. Ratio Energies (Finance) reported $113 thousand of net profit in 2025, after a $184 thousand loss in 2024. Superficially, that looks like improvement. In practice, interest income on the partnership loan and interest expense on the bond were both $5.678 million. So the financing mechanism remained almost perfectly matched, and profit was driven mainly by $113 thousand of expected credit loss income against $206 thousand of G&A expense.

That distinction is critical because it separates asset quality from issuer quality. When everything works, the issuer should look almost boring. So whenever a reader sees positive profit here, the immediate question should be whether it reflects recurring economics or an accounting adjustment. In 2025, it was mostly the latter.

Where the money is really made

The cash that ultimately serves the debt is created at Leviathan. There the picture is more mixed. On the one hand, 2025 still delivered 10.89 BCM of gas sales, and the project added condensate volumes of roughly 856.75 thousand barrels. On the other hand, partnership revenue fell from about $375.9 million in 2024 to about $335.0 million in 2025. EBITDA fell to about $217.4 million, and the presentation explicitly framed the weaker year through lower Brent-linked pricing and a short production interruption.

This is where it matters to ask who paid for the preserved volume. The volume picture did not collapse, but realized pricing did weaken, largely because part of the contract base is linked to Brent. That means the resilience of the model in 2025 did not come from an especially supportive price environment. It came from continuing production and from contract structures that still held demand together.

This chart sharpens two points. First, the domestic market is much smaller than export markets, so it is not a full substitute if exports weaken. Second, the 2025 decline came mostly from exports, not because Leviathan suddenly stopped mattering, but because pricing and the regional backdrop became less supportive.

Competition exists, but dependence is the bigger issue

In the expected-credit-loss model, specific risk was increased partly because of competition, major-customer dependence, and Egypt's economic condition. That is not an abstract model choice. The key export customers are Blue Ocean in Egypt and NEPCO in Jordan, and the expansion of Egypt exports makes the Egyptian channel even more central to the thesis.

That is a weakness on one side. Egypt remains a destination with a low sovereign credit profile and meaningful economic sensitivity. On the other side, it is also dependent on Leviathan gas for domestic use and LNG-related needs. Jordan also relies materially on this supply for electricity generation. So the picture is neither "weak customer versus strong supplier" nor "airtight contract that removes risk". It is interdependence, which can work well in normal periods and then become fragile very quickly in periods of political or operating stress.

Cash Flow, Debt, And Capital Structure

At the issuer level, the balance sheet is almost a mirror

At year-end 2025, Ratio Energies (Finance) had about $16.1 million of current assets and about $64.5 million of non-current assets. Almost all of that balance sheet is the loan to the partnership. On the liabilities side, current liabilities were about $15.6 million and non-current liabilities about $64.5 million, almost all of them Series D bonds. This is the economics of a conduit.

This chart matters because it shows that the issuer's liquidity is not a pool of free cash. Most of working capital is a current receivable from the partnership, not a real cash cushion. Even the fall in cash and cash equivalents to just $59 thousand does not mean standalone stress, because a short-term deposit of about $1.007 million was placed at the same time. Still, it makes clear how little the issuer is built to absorb a serious disruption on its own.

At the partnership level, this is where the all-in cash picture sits

If the goal is to understand debt-service flexibility, the analysis cannot stop at the issuer. At the issuer level, almost every interest and principal flow is matched against the partnership. The relevant cash picture is therefore the one at Ratio Energies and Leviathan. This is an all-in cash-flexibility question, meaning what room is left after actual financing and development needs, not just what accounting profit is reported.

The disclosures give three hard anchors. The first is the May 2025 refinancing: a $600 million facility, of which $450 million was drawn. The second is the covenant layer, which still looks comfortably remote from pressure. The third is the liquidity layer shown in the presentation, with about $109 million of cash, securities, and short-term deposits at December 31, 2025. That is still not a full cash bridge after all future uses, so it should not be presented as a complete surplus-cash picture. But it is enough to say that the immediate wall does not currently sit at the covenant level.

This is also where the gap between value created and value accessible becomes visible. The partnership may look stable in its debt metrics and in its current liquidity position, but until the Leviathan expansion actually starts contributing, it still needs to fund CAPEX, absorb geopolitical risk, and keep export routes open.

The royalty is stress collateral, not a substitute for current debt service

This is the single most important finding in Ratio Energies (Finance)'s capital structure. The royalty is not a coupon mechanism, not a deposit account, and not a source of current cash that can simply be counted as part of ordinary debt service. The loan agreement states clearly that the collateral, remedy, and sole recourse in a non-payment scenario is the royalty. At the same time, cash from that royalty is subordinated to state royalties, overriding royalties, and current payments to the financial institutions that funded Leviathan's development.

That is exactly the difference between value created and value accessible. Leviathan may continue to generate real economic value, but if bondholders ever need to collect through the pledged royalty, that is no longer a normal cash-distribution scenario. It is already a stress scenario with senior layers ahead of them.

This chart sharpens the structure. Yes, roughly $15 million of principal was amortized in October 2025, and debt did come down. But the issuer's equity remained tiny relative to the balance sheet. So the real protection layer is not the issuer's capital base. It is the quality of the asset under it.

Forecasts And Outlook

Before going deeper, here are 5 non-obvious findings that should shape the forward read:

• The 2025 profit says very little about issuer quality. It came almost entirely from the lower expected-credit-loss reserve.
• The pledged royalty sounds stronger than it is in practical accessibility. It is a recovery mechanism for an end-of-stress scenario, not a current cash-flow channel.
• The real good news arrived after the balance-sheet date. The Egypt amendment, the expansion FID, and the third-pipeline completion are all 2026 events.
• Covenant headroom is wide, so the near-term risk is not a covenant number but operating continuity and execution.
• 2026 is a bridge and proof year, not a harvest year. The full benefit of the first expansion stage is only expected in the second half of 2029.

2026 is a bridge year

The single most important thing the company needs to show in 2026 is not another legal protection clause and not another collateral description. It needs to show that the physical system works consistently enough to justify the bond's amortization path. The third pipeline is now complete, but completion alone is not the end of the story. The market will want to see installed capacity translate into production, transport, and sales, without security or operating shocks erasing the benefit.

At the same time, 2026 opens with a clear contradiction. On the one hand, the partnership is pushing forward with a larger export path and a capacity-expansion timetable. On the other hand, the statements were approved while Leviathan was already in a meaningful shutdown period with no full estimate of the damage. So 2026 is not a calm consolidation year. It is an operating proof year inside an unstable geopolitical environment.

2027 to 2029 should move the story from resilience to capacity

The first expansion stage is expected to deliver first gas in the second half of 2029. That matters not only from a volume perspective, but because Series D also reaches final maturity in that same year. The market is therefore likely to judge the years leading up to 2029 through one practical lens: is the expansion advancing on time and being financed in a controlled way.

The Egypt export amendment adds 130 BCM of contractual volume through 2040, which expands the demand runway. But between a contract and a coupon stand infrastructure, approvals, pipelines, regulators, foreign contractors, and the security backdrop. Anyone jumping over that layer and reading 130 BCM as money already sitting inside Ratio Energies (Finance) is making the story cleaner than it really is.

This chart comes directly from management's forward framework and should be read exactly that way: projected cash flow before debt service. It matters not because it solves every question, but because it shows what management is asking the market to believe, a path with more than $2 billion of cumulative cash flow over the coming decade. For a bond investor, the meaning is two-sided. There is clearly a theoretical base for debt service. But it is still before debt service, before potential delays, and before geopolitical disruptions.

What the market will measure over the next 2 to 4 quarters

The first test is simple: whether Leviathan returns to sustained production after the early-2026 shutdown. The second test is commercial: whether the completed third pipeline translates into real throughput and sales, not just into an engineering headline. The third test is financial: whether expansion funding and export-infrastructure progress remain inside a framework that still preserves wide covenant headroom.

In that sense, the thesis on Ratio Energies (Finance) is unlikely to break on the issuer's income statement. It will break, if at all, on Leviathan's operating status, on the pace of export-infrastructure execution, and on the partnership's ability to keep financing in a comfortable place while large projects are moving.

Risks

Extreme concentration in one asset, one partnership, and one country

Ratio Energies (Finance) effectively holds one economic exposure. There is no loan portfolio, no second line of business, and no broad equity cushion. There is one loan to one partnership, dependent on one field, one offshore platform, and one geopolitical region. That is extreme concentration, even if the asset itself is high quality.

Collateral that looks strong, but is slow to become accessible

The effective collateral is a royalty, but it sits behind more senior payment layers and becomes truly relevant only in a stress scenario. So anyone translating the existence of the royalty directly into a current cushion for bondholders is underweighting the cash-flow risk.

Egypt and export infrastructure are both engine and constraint

The Egypt export amendment is good news. But it also sharpens dependence on the Nitzana route, on related maritime and onshore infrastructure, and on Egypt's economic condition. In the IFRS 9 work this already shows up through higher specific-risk inputs for major-customer dependence, competition, and geopolitical exposure. That does not mean the contracts are weak. It means execution depends on too many links that the issuer itself does not control.

The expansion can strengthen the credit, but first it demands capital and execution

The first expansion stage is strategically the right move. It should increase capacity, broaden the sales base, and improve the ability to spread financing over a larger cash-generating engine. But before it strengthens the credit, it adds CAPEX, regulatory and contractor dependence, and a need to keep the system stable in a period where the security backdrop is still causing shutdowns and delays.

Conclusions

At first glance, Ratio Energies (Finance) looks like a simple and almost sterile bond issuer. In a legal sense, that is correct. In an economic sense, it is misleading. What supports the thesis now is a relatively high-quality underlying asset, wide covenant headroom at the partnership financing level, and three constructive 2026 events: the Egypt amendment, the expansion FID, and the third-pipeline completion. What keeps the thesis from becoming cleaner is the fact that the entire structure still rests on Leviathan's operating continuity, while the issuer's own protection layer is thin and the pledged royalty is designed for stress recovery rather than current debt service.

Current thesis: the bond of Ratio Energies (Finance) still rests on a real and strong operating engine at Leviathan, but the issuer's own protection layer is very thin, so 2026 to 2029 will be judged through continuity of production, export execution, and expansion progress, not through any standalone profitability at the company level.

What changed relative to the previous understanding? Three early-2026 developments reduced part of the doubt around the expansion path: the Egypt export amendment became effective, the first expansion stage received FID, and the third pipeline was completed. At the same time, February 2026 reminded the market again that geopolitical risk is not background noise. It sits inside the core of the credit story.

Counter thesis: one can argue that the caution here is still too heavy because the partnership remains comfortably inside its covenants, has already refinanced a meaningful financing layer, expanded its export runway, and completed a major capacity project. On that reading, even if the pledged royalty is not a current cash mechanism, the probability of ever needing to rely on it in practice is still low.

What could change the market's short-to-medium-term interpretation? A stable return to production at Leviathan, visible use of the new 14 BCM capacity, tangible progress in export infrastructure, and continued preservation of easy covenant headroom even as expansion spending ramps up. What would weaken the read is further shutdowns, additional delays in export infrastructure, or a growing realization that the apparently strong collateral is not the same thing as current accessible cash.

Why does this matter? Because the investor here is not simply buying a dollar-linked bond. They are buying a chain of dependence between one field, one partnership, and one issuer. As long as that chain functions smoothly, the structure looks strong. If one link stalls, it becomes clear very quickly how little stands between the bondholder and a recovery-through-collateral scenario.

Over the next 2 to 4 quarters, the thesis strengthens if Leviathan returns to steady production, if the larger capacity begins to show up in real sales, and if the expansion advances without materially compressing financing headroom. It weakens if security uncertainty keeps interrupting production, if export routes continue to slip, or if the market starts to appreciate that the apparently solid collateral is not equivalent to current cash support.