Lapidoth-Heletz: What The Reserve Table Is Really Worth, And Where 2P Stops And Option Value Begins
Heletz's reserve table looks like a clear valuation anchor at first glance, but it is not the same object as the oil asset tested for impairment. The gap between a field-wide 2P case, a two-well book asset, and contingent Kokhav upside is the whole point of this continuation.
Rather than reopening the full company story, this follow-up isolates the reserve table itself. On first read it looks like hard proof of value, while in practice it mixes three different layers: reserves for the field as a whole, an oil asset that is actually tested for impairment on the balance sheet, and contingent resources that are not reserves at all.
That is the whole story. 2P is not book value, and book value is not a verdict on the entire field. The partnership reports 0.955 million barrels of 2P reserves for the full Heletz lease as of January 1, 2026, but the impairment note is built around just two wells, Heletz 3 and Heletz A41, with only about 169 thousand barrels of 2P attached to them. Anyone who treats those two numbers as if they describe the same asset is collapsing the most important distinction in the filing.
That is also where the line between 2P and option value really sits. First, there is the formal line between reserves and contingent resources: Kokhav Dolomite is shown as 2C contingent resources of 3.108 million barrels, and the filing explicitly says those volumes cannot be treated as reserves. But there is a second line even before that. A field-wide 2P case is still not the same thing as the amount the balance sheet is willing to recognize today, because accounting remains tied to a narrower asset set, higher discount rates, and a restart timeline that keeps moving.
Four non-obvious takeaways matter here:
- The reserve table speaks about the whole field, while the impairment test is effectively anchored to two wells.
- The real option bucket sits in Kokhav Dolomite, which is classified as contingent resources rather than reserves.
- Discounting and timing do most of the economic work, and the filing explicitly warns that discounted cash flow is present value, not necessarily fair value.
- The same PDF also carries an attached reserve opinion with an earlier reference date and higher NPV numbers, so there is no single reserve-value figure that can be quoted without first saying which table is being used.
What Actually Sits Inside The Reserve Table
The headline reserve table looks straightforward at first: 1P of 0.607 million barrels, 2P of 0.955 million barrels, and 3P of 1.369 million barrels. But the internal split matters more than the headline. Within 1P, only 0.161 million barrels are classified as "on production", another 0.136 million barrels are "approved for development", and 0.311 million barrels are only "justified for development". In other words, even the proved layer is not one clean producing block. A large part of it still sits in development logic rather than active output.
That matters because 2P is already a field-development case, not a pure read on what is already working. That does not make it irrelevant. It does mean the reader cannot treat it like cash in hand or like a booked asset. The move from 1P to 2P adds 0.348 million barrels, and the move from 2P to 3P adds another 0.414 million barrels. Those are different certainty layers, not interchangeable piles of value.
The key point is not only that 2C is larger than 3P. It is that 2C is a different class altogether. Kokhav Dolomite is classified as contingent resources, and the partnership explains why: implementation is less than reasonably certain, so those volumes cannot be treated as reserves. It also lists the two conditions that would need to be cleared before the option can migrate toward the core case: proving the reservoir has not already been depleted, and proving commercially attractive production rates. That is explicit option value, not reserve value.
Why 2P Is Not Book Value
The accounting note tells a very different story. The oil asset on the balance sheet stands at NIS 5.802 million at the end of 2025, after a cumulative impairment allowance of NIS 7.564 million. But that asset is not "Heletz" in the broad sense used by the reserve table. It is built from just two capitalized wells: Heletz A41 with a carrying amount of NIS 3.437 million, and Heletz 3 with a carrying amount of NIS 2.365 million.
The filing also says outright that the impairment test is based on a reserves report for those two wells. The earlier update showed 106 thousand proved barrels and 168 thousand barrels of 2P for them, and the 2025 update says there was no reserves change other than a negligible move in 2P to about 169 thousand barrels. That is a completely different scope from the 0.955 million barrels of 2P reported for the full lease.
| Layer | What it includes | Scale |
|---|---|---|
| Full-field 2P case | Entire Heletz lease | 0.955 million barrels |
| 2P case used in the impairment test | Heletz 3 and Heletz A41 | about 169 thousand barrels |
| Oil asset on the balance sheet | The two wells after impairment | NIS 5.802 million |
That is exactly why a direct comparison between the reserve table and the carrying value creates noise. The balance sheet is not saying the whole field is worth only NIS 5.802 million. It is saying that the asset currently recognized in accounting, under the assumptions applied to those two wells, is worth NIS 5.802 million. That is accounting conservatism on a much narrower asset base, not a full translation of the reserve table into book value.
The accounting sensitivity also shows how non-rigid that value still is. According to the note, a 5% increase in the after-tax discount rate would lower the oil asset's value to NIS 4.798 million, while a 5% decrease would lift it to NIS 7.250 million. Even inside the two-well accounting universe, discount rate alone moves the answer materially.
Discount Rate And Timing Do The Heavy Lifting
To understand what the reserve table is actually worth, you have to move from barrels to economics. In the full-field table, after-tax future net revenue for the 2P case is US$ 16.40 million with no discounting, US$ 11.14 million at 5%, US$ 7.72 million at 10%, US$ 5.41 million at 15%, and US$ 3.79 million at 20%. The 1P case erodes even faster, from US$ 7.19 million undiscounted to US$ 1.42 million at 15% and only US$ 0.54 million at 20%.
That is not a technical footnote. It means the real debate around Heletz is not simply whether 2P exists. It is what discount rate is defensible, what timeline is realistic, and what probability the market should assign to the field actually moving from development to production. The filing itself reinforces that point by stating that discounted cash flow represents present value, but not necessarily fair value. That is a material warning, not boilerplate.
In the detailed 2P cash-flow table at a 13.75% discount rate, the after-tax discounted value is US$ 5.91 million against cumulative revenue of US$ 55.43 million. But a large share of the gross economics disappears on the way down: US$ 13.40 million in royalties and abandonment, US$ 12.47 million in operating costs, US$ 8.26 million in development costs, and US$ 4.90 million in taxes. Even in the relatively constructive 2P case, most of the gross revenue never reaches the unit holder as value.
The sensitivity table makes the same point even more sharply. A 20% drop in oil price or production volume pushes the 2P case down to US$ 2.36 million and sends the 1P case to negative US$ 0.70 million. A 20% increase, by contrast, lifts the 2P case to US$ 8.44 million. That is the critical insight: the proved layer on its own does not offer much cushion, and the real economic buffer only starts to appear once the analysis moves up into 2P.
The File Itself Does Not Give One Clean Number
There is also a methodological yellow flag inside the document. The periodic report includes a reserve table for January 1, 2026, with 0.955 million barrels of 2P and a 15% NPV of US$ 5.41 million. But the same PDF later includes the reserve auditor's attached opinion dated January 7, 2025, with economic tables as of January 1, 2025, showing the same 0.955 million barrels of 2P but a 15% NPV of US$ 6.43 million. The 3P case is higher there as well, US$ 12.34 million versus US$ 10.88 million in the periodic-report table.
| Table inside the file | Reference point | 2P at 15% | 3P at 15% |
|---|---|---|---|
| Periodic-report reserve table | 31.12.2025 / 1.1.2026 | 5.41 | 10.88 |
| Attached reserve opinion | 7.1.2025 / 1.1.2025 | 6.43 | 12.34 |
That does not necessarily mean one number is wrong. It does mean the reader cannot pull one figure from the PDF and talk about "the reserve value" as if the document contains only one economic run. First you have to decide whether you are talking about the field-level table in the periodic report, the attached reserve opinion, the two wells that feed the impairment note, or the Kokhav option. Those are four different starting points.
The timing layer is not perfectly aligned either. The reserve-section narrative says the opinion assumes production will resume during 2026, while the strategic section points to 2027, and the impairment note explicitly says the restart estimate was updated to 2027. In a field like this, a one-year delay is not a side issue. It goes directly into the discount rate logic, the development cash outlay, and the amount the balance sheet is willing to recognize.
Where 2P Ends And Option Value Begins
The right way to read the filing is through three separate boxes, not one number.
The first box is the accounting asset: two wells, NIS 5.802 million on the balance sheet, high sensitivity to the discount rate, and a cumulative impairment burden already taken.
The second box is the field reserve case: 0.955 million barrels of 2P for the full lease and US$ 5.91 million of after-tax discounted value at 13.75%. That is already an economic reserve case for the field, but it still depends on development, approvals, royalties, taxes, and discounting. It is scenario value, not cash value.
The third box is the geological option: Kokhav Dolomite, with 2C of 3.108 million barrels, which the partnership itself defines as contingent resources that cannot yet be treated as reserves. The upside can be large, but it remains outside the core case until the hurdles the filing itself identifies are removed.
That is why the reserve table matters, and also why it should not be compressed into a single valuation line. If you add together field 2P, the booked oil asset, and Kokhav 2C, you are building paper value too quickly. If you separate them, the picture becomes much cleaner: Heletz has a real reserve base, the balance sheet reflects a far narrower recognized asset, and there is also a meaningful option that still lacks reserve status. What decides between those three boxes will not be another barrel headline. It will be actual movement in the permitting and execution path.
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