Modiin in 2025: The Assets Look Bigger, but Financing Still Runs the Story

Getting to Know the Company

At first glance, Modiin can look like another small oil partnership that keeps publishing reserve reports, talking about new deals, and trying to persuade the market that it is worth more than what shows up on the screen. That is only a partial description. In practice, this is a limited partnership with just 6 employees, reliant on US project operators for almost every operating layer, and currently split between two very different worlds. One world is a producing base that generates revenue and cash. The other is the layer that drives the story in the market, future development, transactions, and financing structures.

What is working today is clear enough. In 2025 the partnership posted $25.1 million of revenue, $5.4 million of EBITDA, and $6.8 million of cash flow from operations. Cash at year end stood at $16.4 million. North Park Basin in Colorado still provides the main operating base, and the updated reserve report published on March 30, 2026 valued the partnership's attributable after-tax discounted cash flow at roughly $214.9 million on a 2P basis and $239.5 million on a 3P basis. There is a real asset here, not just a concept.

The problem is that in 2025 the financial structure moved faster than the business itself. Revenue fell 19%, EBITDA fell 38%, the fourth quarter produced negative EBITDA of about $0.8 million, and the partnership chose not to participate in the 2025 wells at NPB. Anyone reading the year-end cash balance as proof of operating strength is missing the core point. This was mainly a cash balance built through the capital markets.

That is also where it is easy to misread the asset story. NPB looks bigger after the reserve update, but that report rests on a multi-year development plan of about 100 wells over about 10 years, while as of the annual report approval date the operator still had not presented a 2026 development plan. Chittim Ranch received both a non-binding $6 million sale offer in early 2026 and an outside funding structure that could finance further development, but neither development is yet the same as closed cash for common unitholders. Grapevine received a larger contingent resource report, but it is still a contingent-resource story in California under a tight permitting regime. Cassini remains a small producing well. In other words, value is being created across several layers, but the value actually accessible to unitholders is a narrower layer.

This is also not an easy security to turn into a simple market action. On the latest trading day in the market snapshot, the units traded around 123 agorot, for a market cap of roughly NIS 42 million and turnover of about NIS 248 thousand. On the other side of that screen sit negotiations for a roughly $190 million Gulf of Mexico acquisition, Series G bonds with NIS 160.0 million of par outstanding, bank debt, and reserve reports that imply years of drilling. That gap between value created and value accessible is the whole story.

The quick economic map looks like this:

That chart matters because it sharpens the central gap. NPB already carries meaningful economic value, but that value sits on years of future development. Anyone buying Modiin today is not buying only producing barrels. They are also buying financing patience, partners, permits, and the ability to carry the capital structure through the process.

Events and Triggers

The Gulf of Mexico deal could change the scale, but also the risk profile

The first trigger: in February 2026 the partnership reported negotiations to acquire a 12.5% working interest in a producing oil and gas field in deepwater Gulf of Mexico. Based on information provided by the seller and its representatives, current net output attributable to the offered interest is about 4,500 to 5,000 BOED, about 96% oil, and 2025 revenue from the offered interest was about $100 million. The estimated purchase price is about $190 million, plus up to $15 million of contingent consideration.

That is a large headline, but it should be read primarily as a financing event, not just a geological one. Relative to a partnership trading around a NIS 42 million market cap, this is a deal that could change the operating scale, but it could also redefine the entire risk layer. The filing says the partnership has non-binding preliminary financing indications for up to 70% of the purchase price and is examining bringing in additional partners. The real question is not whether the asset looks attractive. The real question is what remains for common unitholders after banks, partners, ROFR, contingent consideration, and any added equity if needed.

Chittim moved from a technical story to a monetization story

The second trigger: on February 11, 2026 Modiin USA received a non-binding offer from Carapace to acquire the partnership's entire 20.02% interest in the Chittim Ranch project for $6 million in cash. As of that filing, the partnership's total investment in the project was about $4.2 million, the carrying value as of September 30, 2025 was about $3.6 million, and management estimated that a completed sale would generate a pre-tax gain of about $2.2 million and imply a roughly 42% return on investment.

That is a small number in energy terms, but an important number in Modiin terms. For the first time there is a route that translates the asset not just into another reserve report but into a concrete cash price. The limitation is obvious, the offer is not binding and depends on Carapace financing, negotiations, and final agreements. So this is not a transaction yet, but it is already a reference point for what the Texas interest might be worth if management chooses monetization rather than waiting.

The third trigger: on February 24, 2026 the partnership reported that Carapace and Turonian entered into an investment agreement with LFO Energy VI that includes $10 million in cash and a $30 million carry for further development. The carry is meant to fund new wells, production-enhancement work in existing wells, and the second completion stage of the Chittim 3018H well. In exchange, the investor will receive 75% of the rights in the carry wells and in 3018H until it achieves a 2.5x payout, after which its share falls to 50%. The deal is also conditioned on Turonian securing landowner consents of at least 88%.

This improves one thing and worsens another. It improves execution capacity because it brings in outside development capital without requiring Modiin to fund all of it itself. But it also highlights that value is currently rising at the asset layer, not necessarily at the common-unitholder layer. When Modiin holds only 20.02% indirectly in Carapace, and new development is funded by an outside party receiving economic priority in the wells, the right question is not only whether the project can grow. It is also how much of that growth actually reaches the public partnership upstream.

NPB looks bigger on paper, but 2026 has not really started yet

The fourth trigger: on March 30, 2026 an updated reserve report was published for NPB. The partnership's attributable share of 2P reserves stood at 32.8 million barrels of oil and 37.4 BCF of gas before royalties, or 27.2 million barrels of oil and 31.2 BCF of gas on the economic-interest basis used for equity holders. After-tax PV10 stood at about $214.9 million on a 2P basis. But the same report also says explicitly that the operator had still not presented the 2026 drilling plan to the partnership, even though it was working on it, and that the overall development plan includes about 100 wells over about 10 years.

So the market gets two things at once: attractive discounted value numbers, and a reminder that the next operating step is not yet in place. That is exactly why future value should not be confused with near-term certainty.

Efficiency, Profitability and Competition

The main story of 2025 is that weak pricing and operating friction hurt results much more than the broader asset narrative suggests. Modiin did not lose the business, but the reported business did not really improve.

Revenue fell, and price was the first source of pressure

Revenue in 2025 came in at $25.052 million, down from $30.880 million in 2024. That is a decline of about 19%. Management broke down the change in a way that is actually helpful because it shows the quality of the deterioration. The average realized oil price fell about 13%, to roughly $57.7 per barrel from roughly $66.1 in 2024. At the same time, barrels sold fell about 7%, to about 422 thousand from about 452 thousand. Lower transportation costs at NPB partly offset the hit, and starting January 1, 2025 transportation cost fell to about $8.8 per barrel, then from July 1, 2025 fell again to about $8.5 per barrel, versus $10.4 in 2024.

That chart makes an important point. Cheaper transportation helped, but not enough. 2025 was not a year of one technical hit. It was a year in which the average price simply weakened faster than the operating base could compensate.

The fourth quarter was worse. Revenue fell to $4.322 million from $6.178 million in the comparable quarter. This was not only about price. The average price fell about 15%, to about $51.6 per barrel, and barrels sold fell 16%, to about 80 thousand.

Profitability weakened, and earnings quality weakened with it

EBITDA in 2025 fell to $5.427 million from $8.755 million in 2024, a decline of about 38%. The drop did not come only from lower revenue. The partnership recorded about $1.589 million of expense due to an unusual increase in gas marketing costs at NPB, triggered by a compensation mechanism under the gas sale agreement with Crusoe Energy because production volumes were below expectations.

That matters because it is a reminder that oil revenue is not the whole story. Modiin operates in an environment where associated gas handling, and the way that gas is marketed or used, can alter profitability. When management says this expense should decline materially after completion of the pipeline connecting the northern and southern parts of the field and in light of incremental production from the 2025 program, that matters. But it also means the positive case has not yet been proven in the 2025 annual numbers themselves.

The quarterly EBITDA line turned more sharply. In the fourth quarter of 2025, Modiin reported negative EBITDA of about $0.765 million, versus positive EBITDA of $1.419 million in the comparable quarter. The swing reflected both weaker revenue and about $0.690 million of higher gas marketing expense. By year end, the business was not merely slowing. It had reached a quarter in which any operating miss or friction point was visible immediately.

Modiin is not a pricing-power story

That point is key to understanding competition. Modiin operates in a commodity business. The sale price in its projects is linked to WTI or Brent, adjusted for transportation and related factors. The competitive question is not whether the partnership can demand a better market price. It is whether it can choose assets well, enter development programs with acceptable returns, and manage transportation, marketing, and operating costs without seeing the margin disappear. When transportation improved in 2025 but profitability still deteriorated, the current problem is not classic competition. It is the quality of participation in the asset and in the work program.

Cash Flow, Debt and Capital Structure

In Modiin's case, it is essential to define which cash lens is being used. The right lens here is first and foremost all-in cash flexibility, because the central thesis is not how much the wells could generate over time, but how much room actually remains for common unitholders after drilling, debt, interest, and financing cycles.

Operating cash flow stayed positive, but the full picture still leans on the capital markets

Cash flow from operations was $6.780 million in 2025, versus $10.066 million in 2024. Investment in oil and gas assets and associates, together with other investing items, totaled about $6.080 million. In the narrow sense, the existing business still came close to funding that year's investment needs. But that is not the whole picture.

Once interest paid of $6.581 million, loan and credit repayments of $29.082 million, and lease repayment of $0.1 million are added, the picture changes completely. Year-end cash rose to $16.430 million only because the partnership raised $45.658 million net from bond issuance and received another $2.953 million of credit. Without that financing layer, 2025 would have looked much less comfortable.

That is the core cash-flow point. On a normalized or maintenance cash generation basis, the existing business still produces cash. On an all-in cash flexibility basis, which is the more relevant lens today, 2025 was a year in which the capital markets bought the partnership time.

Series G changed the capital structure more than the operating base did

On February 5, 2025 the partnership issued NIS 100 million par of Series G bonds, on February 18 it added another NIS 5 million par, and on July 3 it added another NIS 55.016 million par. Total Series G par outstanding therefore reached NIS 160.016 million by year end. Net proceeds from bond issuance in 2025 totaled $45.658 million. The annual coupon is 7.8%, and principal amortizes in five payments between March 2026 and March 2030.

That financing improved one thing and worsened another. It allowed the partnership to refinance more expensive debt, improve the maturity profile, and end the year with a more reasonable cash balance. But it also created a new currency exposure because Series G is shekel-denominated while the partnership's functional currency is US dollars. The annual report states explicitly that material changes in the dollar-shekel exchange rate are expected to have a material effect on results, and the fourth-quarter discussion already links higher exchange-rate expense to Series G.

At year end 2025, bank and other debt stood at $20.586 million, bonds stood at $62.464 million, and cash and cash equivalents stood at $16.430 million. The partnership also reports compliance with the financial covenants of Series G. The LTV ratio measured as of December 31, 2025 stood at 24%, and partnership equity adjusted to exclude hedge-transaction revaluation effects stood at about $29.7 million. So this is not a covenant-on-the-edge story. It is a story of a partnership whose direction is increasingly determined by how it finances the option layer.

Outlook

There are four non-obvious findings that need to be on the table before any timeline discussion begins.

• First: NPB looks much larger in the March 2026 report than the market likely reads from the 2025 operating numbers, but that report rests on a relatively conservative oil price deck and about 100 wells over about 10 years. Without a signed 2026 plan, the number is still not cash.
• Second: Chittim received two different value signals in early 2026, a non-binding $6 million sale offer and a $40 million carry structure, but both sit above the common-unitholder layer and still require signatures, financing, and closing conditions.
• Third: the Gulf of Mexico transaction is not only a growth engine. It could also turn Modiin from a small partnership with optionality into a partnership leveraged to one large transaction.
• Fourth: Grapevine and Cassini add to the option story, but they do not solve the 2026 question. Grapevine still sits on contingent resources and Kern County permitting, while Cassini is too small to change the thesis by itself.

That is why the next year needs a more precise label. This is a proof year, not a breakout year. If NPB gets a reasonable 2026 plan, if Chittim moves into either a monetization route or a funded-development route without wiping out too much upside, and if the Gulf of Mexico deal arrives with an acceptable capital structure, the read on Modiin can improve. If not, 2026 will remain a year in which value is created in reports, but not necessarily made accessible to common unitholders.

NPB, the current economic base is still waiting for the next step

The important part of the NPB report is not only the PV10. The assumptions matter. The price deck used in the discounted cash flow was $49.53 per barrel in 2026, $50.92 in 2027, and $54.35 from 2030 onward. Transportation cost assumptions ranged from $6.5 to $8.5 per barrel. At the report date, the partnership noted that actual oil prices and the forward strip were higher. In one sense, that makes the report conservative. But the capex plan assumes about 100 wells over about 10 years, and the report itself says the operator had still not presented the 2026 plan.

That means the reserve uplift rests on two conditions that still need to prove themselves together, commodity prices and executable development. The market should focus less on the 2P and 3P numbers by themselves and more on the simple question of whether NPB is returning to a path where the partnership has a plan, participation, and financing capacity.

Chittim, the question is no longer only geology but route selection

At Chittim, the story has become more interesting precisely because two very different routes have opened. A $6 million sale, if completed, would convert part of the option value into immediate cash and create an accounting gain. The LFO transaction, if completed, would keep the partnership inside a developing project without forcing it to fund the full burden itself. But it would also transfer a large share of the early upside to the funding partner. So the move is not one-directional. It improves execution capacity, but it may dilute Modiin's economics at the stage where operating value starts to form.

The updated reserve and resource report for Chittim also needs to be read carefully. As of December 31, 2025 the partnership's attributable 2P reserves were about 2.445 million BOE and 3P reserves were about 4.817 million BOE. At the same time, contingent resources in the 2C category stood at about 0.853 million BOE, while the high 3C estimate was much larger. That is exactly the point: the bigger numbers sit in a layer that still requires investment decisions, additional technical information, commercial progress, and a development plan.

The Gulf transaction, if completed, would force the market to read Modiin differently

The Gulf of Mexico thesis is fairly simple. If Modiin enters a producing asset of a completely different scale, it stops being only a partnership rotating through relatively small option assets and starts becoming a production and cash-flow story at a larger field level. But even here the focus has to remain on what stays with common unitholders. A roughly $190 million price, up to $15 million of contingent consideration, partner ROFR, and up to 70% planned debt financing leave enough room for both good capital structures and less attractive ones.

The market will not judge the headline. It will judge the paperwork. Who are the partners, how much debt goes in, whether there is an equity component, what the financing cost is, and how the July 1, 2025 effective date affects purchase-price adjustments. Those details will decide whether the deal is seen as an opportunity or as added risk.

Risks

Commodity prices and field economics

Modiin operates in a business where a material decline in oil prices can hurt not only revenue, but also development economics, financing capacity, and reported asset value. This is not just a generic sector risk. In 2025 the average realized price already fell to $57.7 per barrel, and the numbers show how quickly that reaches the bottom line.

Dependence on operators and other partners

Throughout the report the partnership makes clear that it depends on the operators of its various assets, and that withdrawal of an operator or a change in operator status could hurt timing and costs. That is a very practical risk because Modiin does not operate these projects itself. In some assets its ownership stake is also relatively small, which limits voting power. The report explicitly lists minority voting influence as a specific risk factor.

Regulation and permits

NPB, Chittim, and the other assets all remain exposed to permits and environmental compliance. Grapevine carries a sharper local permitting issue. The Grapevine report notes that new permits in Kern County were, as of 2026, being issued case by case and under tight oversight after a series of legal and regulatory developments. In California, having a resource is not enough. The permitting path also has to work.

Financing and currency

The partnership itself identifies lack of resources for development and participation as a unique risk. That is not theoretical wording. The 2025 numbers already showed in practice that the year-end cash position rests on Series G. The remaining bank debt also includes a variable-rate component at SOFR plus roughly 5.35% to 5.36%, while Series G exposes reported results to dollar-shekel volatility.

Liquidity and screen-level practicality

There is also a practical market constraint. A security with a roughly NIS 42 million market cap and daily turnover of about NIS 248 thousand can carry many large ideas, but in practice every financing move, every partner decision, and every shift in how the market reads the capital structure will be felt more quickly.

Short Interest View

In Modiin's case, short-interest data do not point to an extreme dislocation. As of March 27, 2026 short balance stood at 142,235 units, SIR was 0.34, and short interest as a percentage of float was 0.71%. That is slightly above the sector average short-float level of 0.54%, but far below a level that would suggest an unusually aggressive market bet against the units. SIR is also very low versus the sector average of 1.718.

The takeaway is fairly straightforward. The market may be skeptical, but it is not expressing that skepticism through a crowded short. The main argument remains fundamental, how much of this optionality can actually pass through the financing layer and remain with common unitholders.

Conclusions

Modiin exits 2025 with one clear positive and one clear burden. The positive is that it has a live operating base, one main asset in NPB that already looks larger in the reserve reports, and two further option layers, Chittim and the Gulf transaction, that could move the scale of the partnership. The burden is that 2025 itself did not show an operating engine opening up. It showed an engine still running while profitability weakened and the capital structure changed faster than the business. In the near to medium term, the market is still likely to react more to financing, partners, permits, and deal execution than to another reserve table.

Current thesis in one line: Modiin's assets look larger today, but the real test is whether they can become accessible value for common unitholders without building an even heavier financing-risk layer.

What changed: during 2025 and early 2026 the story moved from "what is in the ground" to "under what capital structure and with which partners management will try to realize it."

Counter-thesis: that caution may be too heavy, because bank debt did decline, Series G bought time, NPB received a material reserve update, Chittim now has both a cash offer and outside funding, and the Gulf transaction could make Modiin a larger player faster than expected.

What could change the market read: a reasonable 2026 plan for NPB, binding execution at Chittim or in the Gulf on terms that do not wipe out the common layer, and proof that gas-marketing expense at NPB is truly normalizing.

Why this matters: in Modiin, value does not stop at the question of whether reserves or resources exist. It depends on whether the partnership can preserve a meaningful economic share after financing, carry structures, royalties, currency effects, and minority layers.

What has to happen over the next 2 to 4 quarters: the market needs to see a 2026 plan at NPB, clarity on whether Chittim is heading toward sale or funded development, a transparent financing structure if the Gulf deal moves forward, and continued cash flexibility after interest, amortization, and ongoing investment. What would weaken the thesis is delay, an overly aggressive financing structure, or a situation in which the option layer keeps growing while accessible cash flow stays stuck.