Cohen Development 2025: Profit jumped, but accessible cash still leaned on an equity raise

Getting to Know the Company

At first glance, Cohen Development can look like a simple way to own Leviathan royalties. That is only part of the story. In practice, this is a very lean overriding-royalty platform that receives direct income from Leviathan, Tamar, Karish, Shenandoah and Baskin, while also sitting on an additional value layer through a 50% stake in Avner, which itself holds about 0.96% of NewMed units. There is also an investment-property asset in Petah Tikva, with a fair value of $10.5 million versus a carrying value of $5.3 million. So this is not an operator and not a conventional operating company. It is a company that turns contractual rights, mark-to-market movements and cash distributions into reported earnings.

What is working now is a still-meaningful royalty base. Even after a year of production interruptions, Cohen Development generated $27.7 million of royalty revenue in 2025, including $12.4 million from Leviathan, $7.8 million from Karish, $6.6 million from Tamar and $0.9 million from US assets. This is still a real cash engine. It is also extremely lean at the corporate layer: general and administrative expenses were only $928 thousand, of which salary and management fees were $325 thousand. That means the story here will not be decided by office efficiency. It will be decided by field uptime, realized energy prices, and the ability to turn accounting value into accessible cash.

The problem is that 2025 is very easy to misread. Net profit rose 44.6% to $31.7 million, yet direct royalties fell 5.7%. Operating profit fell 6.9% to $23.5 million. What pushed net profit higher was not an improvement in the direct business, but $12.5 million of equity-accounted profit from Avner, mainly driven by the mark-to-market of Avner's NewMed holdings. That is real value creation, but it is not the same thing as cash arriving at Cohen Development. In 2025, against $12.5 million of profit from Avner, the company received only $1.155 million of dividends from it.

That leaves the active bottleneck elsewhere: in the gap between reported value and accessible cash. The company ended the year with $35.1 million of cash and cash equivalents, versus $5.4 million a year earlier, but that jump was driven in large part by a $31.0 million net private placement. At the same time, the company paid $21.5 million of dividends. This is not a weak picture. Quite the opposite. It is simply not a picture in which the underlying business alone explains what the headline might suggest.

There is also a simple market-screen constraint. Based on the April 3, 2026 market snapshot, the stock traded at roughly NIS 1.37 billion of market value, but on only about NIS 101.8 thousand of daily turnover. Short interest stood at 0.17% of float with a 1.87 SIR, below the sector average on short float. This is not a name where the debate will be decided by technical positioning. If the reading changes, it will change through Leviathan, through cash upstreaming, and through whether reported profit starts to convert more cleanly into shareholder-accessible cash.

Four non-obvious findings right at the start:

• Profit jumped, but the direct business weakened. Direct royalties fell to $27.7 million from $29.3 million in 2024, while operating profit slipped to $23.5 million, even as net profit rose mainly because of Avner.
• Cash looks much stronger, but it did not build from operations alone. Cash from operations was $19.0 million, almost unchanged from 2024, while the cash balance expanded mainly because of a $31.0 million equity raise.
• Shenandoah adds diversification, but it has not yet changed the center of gravity. Shenandoah and Baskin together contributed only $876 thousand of royalties in 2025.
• 2026 starts with operational noise, not with a clean runway. At the end of February 2026, production was again halted at Leviathan and Karish, and no clear restart date had been given by the report-approval date.

The economic map of Cohen Development now looks like this:

This chart makes two things clear at once. First, there is real diversification across several assets, not one single-field dependency. Second, the mix still does not change the center of gravity: Leviathan and Karish alone supplied about 73% of 2025 direct royalties.

Events and Triggers

The Cohen Development story sits on several events moving at very different speeds. Some already hurt 2025 reported numbers. Some matter for the next couple of years. Others belong more to the back half of the decade. The mistake is to mix them together and come away with a cleaner improvement story than the evidence supports.

The production interruptions already hit the numbers, and they are not really behind us

The first trigger: the Leviathan and Karish shutdowns are not background noise. In June 2025, during Operation Rising Lion, Leviathan and Karish were ordered to stop operating, and the company explicitly says this was one of the main reasons profit before Avner effects declined. On top of that, Leviathan was also shut for about 11 days during the second quarter for planned works tied to the third pipeline project and routine maintenance. So the drop in Leviathan royalties to $12.4 million and Karish royalties to $7.8 million is not an accounting quirk. It came directly from lower asset availability.

The more difficult point is that this noise spills into 2026. After the balance-sheet date, on February 28, 2026, production was again halted at Leviathan and Karish. As of the report approval date, the company said no restart update had been received. That means the annual report ends with an event that prevents a simple linear read-through into the next few quarters.

Leviathan improves the strategic picture, but it does not rescue the next quarter

The second trigger: on the positive side, Leviathan moved from planning to commitment in 2026. On January 15, 2026, partners approved FID for the first stage of the field expansion, with a total budget of about $2.36 billion, a target to lift production capacity to about 21 BCM per year, and first gas expected in the second half of 2029. On the same day, all conditions precedent for the expanded Egypt export deal were fulfilled. In addition, the third pipeline project was completed on March 1, 2026.

This is a major positive for the long-term Cohen Development thesis, because it extends the growth runway of the company's most important royalty asset. But this is also exactly where created value and accessible value have to be separated. A project like this can improve asset value today, yet it does not solve the operating uncertainty of the next few quarters, and it does not create incremental royalties before 2029.

Shenandoah proves that diversification is not just theoretical

The third trigger: commercial oil and gas production at Shenandoah started on July 25, 2025, and on October 12 Navitas reported that ramp-up of the four production wells had successfully reached the planned daily rate of 100 thousand barrels of oil, with performance in line with expectations. For Cohen Development, this is the first time the geographic-diversification story became visible in actual royalty income. Shenandoah contributed $761 thousand in 2025, after zero in the prior year.

The issue is that the contribution is still too small to offset Leviathan and Karish in any meaningful way. It does establish direction: a larger US leg and less total dependence on Israeli fields. But in 2025 it is still a supporting leg, not a core engine. The Shenandoah South FID approved on July 27, 2025, with first production expected in Q3 2028, still belongs to the medium-term layer, not to the immediate earnings layer.

Bulgaria moved quickly from attractive option to open question

The fourth trigger: through NewMed, Cohen Development also gained a Bulgaria angle. The transaction to acquire 50% of the license closed on March 12, 2025, and on January 21, 2026, part of the rights was sold to BEH, leaving NewMed Balkan with 45%. Then came the Vinekh update: on February 4, 2026, the company reported the well had reached total depth, only non-significant gas signs were found, and the well was assessed as dry. At the same time, the Krum well was expected to begin in the coming weeks and take about two months.

This is not just a geological story. The company also says NewMed is reviewing whether the overriding-royalty obligation applies to the Bulgaria rights at all, while royalty holders including Cohen Development made clear that in their view it does. So Bulgaria is now much more an option with a legal dispute around it, and much less a bankable future royalty stream.

This chart shows why 2025 cannot be read as a smooth year. Q2 clearly weakened, mainly because of Leviathan and Karish. Then came a partial recovery, and Shenandoah started to enter the mix in the second half. So 2025 was not a year of constant deterioration, but it was also not a clean year of organic growth.

Efficiency, Profitability and Competition

Cohen Development should not be read like a manufacturer, a retailer or a software company. There is no salesforce competition here, no heavy operating CAPEX and no gross-margin story shaped by factory utilization. The company's efficiency is driven by three other things: field uptime, wellhead pricing, and the size of the gap between what gets booked as profit and what really turns into cash.

The 2025 paradox: lower royalties, higher net profit

The central fact of the year is the paradox. Royalty revenue fell from $29.3 million in 2024 to $27.7 million in 2025. Operating profit fell from $25.3 million to $23.5 million. And yet net profit rose from $21.9 million to $31.7 million. That is not a jump driven by the direct royalty engine. It is a jump driven by the rise in Cohen Development's share of Avner profit, to $12.5 million from only $2.1 million in 2024.

In other words, 2025 looks stronger at the bottom line than the direct royalty layer actually was. That does not make the profit less real. It does change its quality. Anyone looking for proof that the direct engine improved should start with Leviathan, Tamar and Karish, and only then move to Avner.

What really moved the royalty layer

The damage to the core royalty layer came from two directions at once. The first was volume. The company says the decline reflected lower natural-gas sales volumes from Leviathan and Karish following production interruptions. The second was price. Both Leviathan and Tamar also saw a lower average price per heat unit because part of their gas contracts are linked to Brent, which declined.

That matters because it shows the difference between a bad operating year and a weaker economic year. Leviathan sold about 10.9 BCM in 2025 versus 11.2 BCM in 2024. Tamar stayed at 10.1 BCM, and Karish stayed at 5.6 BCM. So this was not a collapse in end demand. It was a combination of uptime, timing and average pricing. Even if the security-related interruptions fade, the company is still exposed to price, not only to physical flow.

The chart makes the point clearly: the improvement from Shenandoah is still too small to offset Israel. All three major Israeli assets declined. A new US engine was born, but it is still operating at a very different scale.

The cost structure is already lean, so the real operating leverage sits above the line

The corporate cost layer hardly moved. General and administrative expenses rose from $880 thousand to $928 thousand. Professional services were $504 thousand, salary and management fees were $325 thousand, and insurance was $30 thousand. There is no bloated corporate center here and no obvious restructuring story to tell. If anything, the company is already very lean.

That is exactly why the real leverage sits above the line, not below it. When royalties weaken, there is not much cost to cut in order to compensate. And when royalties improve, much of that improvement can flow relatively quickly into operating profit. That works well in stable years, and less well in years when the fields themselves face interruptions or price pressure.

Another important point hidden in the notes is the petroleum-profits levy. The company recorded a $2.98 million levy in 2025, and says the implied levy rate for the period was about 38.7%, versus about 35% in 2024. This is not a side note. It absorbs a meaningful portion of the gross improvement, which means not every increase in royalties flows one-for-one to net profit.

This is not a classic competitive moat, but a contractual right with built-in limits

Cohen Development's edge is not a brand, not technology and not a sales platform. It sits in contractual overriding-royalty rights across several meaningful oil and gas assets. That is a strong starting point, because it provides exposure to large fields without carrying the full CAPEX and OPEX burden of the operators. But it also creates a different type of friction: the company explicitly says it has no direct access to the information needed in connection with its royalty rights and therefore relies on the disclosures of royalty payors, without being able to verify them independently.

That is an important yellow flag. Not because there is an immediate credibility issue, but because a Cohen Development shareholder is effectively sitting behind several layers of third-party reporting, wellhead adjustments and levy mechanics. That is a good reason not to stop at the net-income line when it looks unusually strong.

This may be the single most important chart for understanding 2025. Direct royalties did not hit a new high. Avner is what changed the picture. So the correct read of Cohen Development is not "royalty earnings surged", but rather "the value layer above the direct royalty engine had a much stronger year than the engine itself".

Cash Flow, Debt and Capital Structure

This is where two different cash pictures have to be separated. The first is all-in cash flexibility: how much cash is really left after dividends, taxes and actual cash uses. The second is normalized cash generation: what the business produces before unusual capital moves. If those two pictures are mixed together, it becomes very easy to overread the year-end cash balance.

The all-in cash picture

On an all-in cash-flexibility basis, 2025 ended far stronger than 2024. Cash rose to $35.1 million from $4.5 million at the prior year-end. Cash from operations was $19.0 million, investing cash flow was positive $2.0 million, and financing cash flow was positive $9.5 million.

But the composition matters. The positive financing number did not come from cheaper debt or a refinancing gain. It came from a $31.0 million private placement, partly offset by $21.5 million of dividends. Without that placement, the increase in the cash balance would have been close to nonexistent. In fact, operating and investing cash flow together produced about $21.1 million, almost exactly against the $21.5 million of dividends paid. That is the core point.

Normalized cash generation is still decent, but it does not explain the cash-balance jump by itself

On a normalized cash-generation basis, the business is not weak. $19.0 million of cash from operations is a good figure for a company with minimal corporate overhead and no reported financial debt on the balance sheet. Even over several years, there is no collapse here: the company generated $17.9 million in 2023, $19.2 million in 2024 and $19.0 million in 2025.

The issue is that cash did not rise with net profit. Quite the opposite. In 2025, net profit was $31.7 million, but operating cash flow was only $19.0 million. A large part of that gap comes from Avner. The company booked $12.5 million as its share of Avner profit, but received only $1.155 million of Avner dividends. So anyone trying to understand how much cash is truly accessible to Cohen Development shareholders should place more weight on cash flow and less on equity-accounted profit that was not distributed.

The capital structure is cleaner than it may look, but the layers still matter

On one hand, Cohen Development's balance sheet is genuinely strong. There is no reported financial debt. Current liabilities totaled only $7.744 million, of which $5.475 million were payables and accrued expenses and $2.269 million were warrant liabilities. Equity jumped to $68.1 million from $29.2 million a year earlier.

On the other hand, it still matters what drove that improvement. Equity rose mainly because of the private placement, which added about $28.5 million, and because of total comprehensive income of $31.7 million, partly offset by the $21.5 million dividend. That is real capital strengthening, but it came from a mix of market access and mark-to-market value, not only from the direct business.

Another point hidden in the financial-instruments note is currency exposure. The company had excess shekel-denominated assets over shekel liabilities of $32.377 million, and it does not present a dedicated hedge layer. So the shekel moves fairly directly into the financing line. In 2025 that helped, with net finance income rising to $1.083 million, but this is still a volatile contributor rather than an operating engine.

And finally, the investment property. It can look like a comfortable cushion, and to some degree it is. But it is not currently generating the recurring cash stream that answers the company's main question. It should therefore be treated as a side value layer, not as the solution to the dividend-funding question.

This chart summarizes 2025 neatly: operating cash flow stayed stable, dividends stayed heavy, and the cash balance exploded only after a capital raise. That is not a criticism of the placement. It is simply the right way to read the improvement in financial flexibility.

Outlook and Forward View

Five findings should anchor the forward view:

• Leviathan remains the main engine, but 2026 starts with operating uncertainty. All of the strategic value from the expansion does not cancel out the fact that production was halted again at the end of February 2026.
• The Leviathan expansion is a 2029 story, not a next-report story. FID and the expanded Egypt export deal matter a great deal, but they do not by themselves clean up the immediate period.
• Shenandoah proves that geographic diversification works, but it is still a small leg. $761 thousand of royalties in 2025 is a good sign, not yet a real counterweight.
• Bulgaria no longer looks like a clean bonus. One dry hole and a dispute over whether royalties even apply make it a higher-friction option.
• The dividend policy now faces a sharper test. If 2026 does not bring clearer operations or a higher organic cash surplus, the market will ask whether the payout pace still fits.

What could improve the reading

The most important positive trigger over the next two to four quarters is a stable return of Leviathan and Karish to full production without prolonged further interruptions. That is the starting point. Above that sit two other engines: continued progress on Leviathan expansion and higher Egypt export throughput, alongside a gradual rise in the contribution from Shenandoah and perhaps also Baskin.

If those pieces fall into place, 2026 can begin to look like the year in which Cohen Development becomes less purely dependent on the Israeli system and more visibly benefits from a broader asset set. But it is important to say this plainly: most of the new strategic value still belongs to later years. Leviathan expansion, Nitzana infrastructure and Shenandoah South are mostly 2028-2029 stories, not next-quarter stories.

What still blocks a cleaner thesis

The main blocker is that created value does not always become shareholder-accessible cash at the same speed that profit suggests. That is true in Avner, where mark-to-market gains are much larger than actual dividends received, and it is also true in Leviathan, where FID and Egypt-export expansion improve the asset's future before they improve near-term cash flow.

There is additional friction in Bulgaria. Even if Krum brings a better result than Vinekh, the underlying question remains whether Cohen Development's royalties even apply to the Bulgaria rights. So it would be too early to build Bulgaria into a clean 2026 numerical story.

What kind of year lies ahead

2026 looks like a proof year with bridge-year characteristics. It is not a reset year, because the balance sheet is clean and the company is not in a survival fight. It is not a breakout year, because the new growth layers have not yet fully entered the cash-flow line. It is a year in which the market will want to see that the direct business holds up, that reported profit does not drift further away from accessible cash, and that another equity move is not needed to support the same payout pace and financial cushion.

In market-reaction terms, the next reports will largely be judged on three questions: have Leviathan and Karish royalties normalized, is Avner contributing more actual cash rather than mostly accounting profit, and are the US assets starting to matter at a scale meaningfully larger than the symbolic 2025 contribution.

The chart is not trying to forecast 2026. It shows what needs to converge. For the thesis to strengthen, direct royalties need to return to growth, and operating cash flow needs to hold at least around current levels without another capital raise being needed to support a high payout.

Risks

The Cohen Development risk stack looks simple, but it is sharper than it first appears. This is not a leverage story and not a covenant story. These are concentration, asset-availability, third-party dependency and value-quality risks.

Israel concentration is still very high

The company did establish a real US leg in 2025, but $26.8 million out of $27.7 million of direct royalties still came from Israel. At the non-current asset level, $32.0 million sits in Israel versus $6.1 million in the US. So any security, regulatory or operating disruption in the Israeli system still moves the company far more than a Shenandoah headline might imply.

The company depends both on operators and on their disclosure

Cohen Development explicitly says it has no direct access to the information required in connection with its royalty rights and therefore relies on royalty-payor disclosures. This is not a theoretical accounting risk. It is a structural limitation. Any change in interpretation, timing, wellhead-price adjustment or disclosure coming from the field partners flows into Cohen Development only through an external reporting layer.

Royalty adjustments and the levy are a reminder that gross inflow is not net cash

At the end of 2025, the company carried a $1.520 million liability related to Tamar and a $2.926 million liability related to Leviathan, reflecting the gap between royalties received and the revenue recognized after price adjustments and effective royalty-rate treatment. That is another example of why the gross receipt number does not simply stay with the company. The petroleum-profits levy also remains a heavy layer, and the tax note says that after the balance-sheet date an agreement was signed with the Tax Authority regarding Tamar, leading to an additional immaterial provision.

Currency exposure and payout policy can both pressure the cash picture

Excess shekel-denominated assets of $32.377 million mean foreign exchange remains relevant. Alongside that, the company chose to pay $21.5 million of annual dividends in both 2024 and 2025. As long as the core assets run smoothly and no further equity raise is required, that policy can look reasonable. If volatility at Leviathan and Karish continues, the discussion can shift quickly from generosity to cash quality.

The market screen remains thin

The final risk is actionability. The stock itself is illiquid and short positioning is minimal. So even if the company delivers better news, the path by which the market absorbs it may remain slow. That is not a business risk, but it is a real pricing and interpretation risk.

The chart reinforces the same conclusion: short interest rose somewhat during the first quarter of 2026, but remained very low in float terms. This is not a stock with unusual technical pressure. It is a stock where fundamentals and liquidity set the tone.

Conclusions

Cohen Development exits 2025 as a company that looks stronger on paper, but still has to prove that this strength is equally accessible in cash. The direct royalty engine weakened this year because of Leviathan and Karish interruptions and lower average pricing, yet the value layer through Avner, together with a private placement, pushed both earnings and the cash balance higher. That is a positive mix, but not a clean one.

The main blocker right now is not debt, and not even a covenant. It is the quality of value translation into cash. That is why short-to-medium-term market reaction will be driven less by another mark-to-market gain and more by the restart of Leviathan and Karish, the pace of cash upstreaming from Avner, and whether the company needs to rely on market access again to preserve the same generosity.

Current thesis in one line: Cohen Development benefited in 2025 from a strong value layer above its core royalty assets, but the thesis really strengthens only if direct royalties and accessible cash begin to close the gap with reported profit.

What changed relative to the simpler reading of the company? It used to be easier to see Cohen Development as a fairly direct pass-through of gas royalties. 2025 makes clear it is now a more layered platform: direct royalties, a NewMed-related value layer through Avner, new equity capital, and an investment-property cushion. That increases value, but it also moves part of the story away from immediately accessible cash.

The strongest counter-thesis is that this caution is overstated. The company has no reported financial debt, $35.1 million of cash, $68.1 million of equity, a meaningful Leviathan FID, expanded Egypt export capacity and first US contribution. That is a serious argument. If Leviathan and Karish restart quickly, and if Avner continues upstreaming more cash, the gap between earnings and bankable cash may look less troubling.

What could change market interpretation in the short to medium term? A clear and stable restart of Leviathan and Karish. A quarter in which direct royalties recover without help from mark-to-market gains. Evidence that Avner's contribution does not remain confined to the income statement. And perhaps the first truly meaningful increase in the US leg.

Why does this matter? Because Cohen Development is no longer judged only on the quality of the assets behind it. It is now judged on whether that exposure can be converted into shareholder-accessible, repeatable cash without excessive reliance on revaluations and fresh capital.

Over the next two to four quarters, the company needs to deliver three clear proofs: that the Israeli assets have returned to stability, that reported profit does not drift further away from accessible cash, and that the US contribution starts to become more than a small line item. What would strengthen the thesis is a return to normal at Leviathan and Karish without another capital raise. What would weaken it is continued interruptions, too-aggressive dividends relative to cash flow, or another year in which Avner contributes mostly accounting profit and less actual upstream cash.