Isramco Negev 2 published its second-quarter report. The operating margin in it is the highest we saw this week, and net profit is far smaller than it.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
A note before the figures: Isramco reports in dollars, not shekels - gas contracts are priced in that currency. All amounts here are denominated in dollars.
The Quarter
| $ millions | The quarter | Share of revenue |
|---|---|---|
| Revenue | 119.1 | |
| Operating profit | 82.2 | 69.0% |
| Pre-tax profit | 38.2 | 32.1% |
| Net profit | 30.1 | 25.2% |
| Earnings per participation unit | $0.01 | |
| Balance sheet total | 1,370.9 | |
| Equity | 595.8 |
Why There Is No Gross Profit Line Here
This is a deliberate omission.
In the structured filing, the gross profit line is exactly identical to the revenue line - both are $119,117 thousand. That is, no separate cost of sales was reported.
And a figure that would read as "a 100% gross margin" is not an economic datum - it is an artefact of how the filing was made. Presenting it would have created an entirely false impression.
The remaining lines of the report - operating, pre-tax, net, equity and the balance sheet - are consistent with one another and appear above.
What a Limited Partnership Actually Is
And this matters for reading the report, because the structure differs from an ordinary company.
Isramco Negev 2 is not a company - it is a limited partnership, and what trades are participation units.
The central difference: a partnership like this holds a share in a project, rather than operating it itself. Its revenue is its share of the field's gas sales, and its direct costs are correspondingly limited.
And that explains the operating margin of 69%. There is no distribution network, no inventory and no sales organisation - there is a share in a producing project.
And it also explains the earnings per unit: $0.01. The number of units in the Israeli gas partnerships is very large, so earnings per unit are low in absolute terms even in a profitable quarter. That is a fact about the capital structure, not about the size of the profit.
And the Gap Between 69% and 25%
$82.2 million of operating profit. $38.2 million before tax.
$44.0 million was taken out - 53.5% of operating profit.
And this is the central figure in this report.
More than half of operating profit does not reach the pre-tax line.
In a partnership holding a share in a producing project, that is usually financing. Developing a gas field is a multi-billion investment made years before the first revenue, and it is funded with debt repaid over the life of the field.
So the high operating margin is not a number that can be read on its own. It describes the economics of the field; what reaches the unit holder is determined after debt service.
And here is how that looks against the week:
| Q2 2026 | Financing as a share of operating profit |
|---|---|
| Afcon | 16.5% |
| Carasso Motors | 43.6% |
| Isramco | 53.5% |
| Azrieli | 74.3% |
And what distinguishes Isramco in the table is that it starts from a 69% operating margin. Even after financing took more than half, 32.1% of revenue remained before tax - more than most of the companies in the table show at their operating line to begin with.
Tax and the Balance Sheet
$38.2 million before tax and $30.1 million after - that is, tax of $8.1 million, an effective rate of 21.3%.
Slightly below Israel's corporate rate of 23%.
| Balance sheet total | $1,370.9 million |
| Equity | $595.8 million |
| Leverage ratio | 2.3 to one |
And 2.3 to one is a low ratio - below Mivne (2.4), Azrieli (2.6), Big (2.9) and Carasso (5.2).
And that demonstrates a point: the balance-sheet leverage ratio does not predict how much of operating profit will go to financing. Isramco is less leveraged than Azrieli and pays a broadly comparable share of operating profit; what determines it is both the interest rate and the size of the operating profit itself.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What I find instructive in this report is that it separates two things that are easy to conflate.
The economics of the field are excellent. An operating margin of 69% is a figure most businesses never see, and it derives from structure: a share in a producing project, with no supply chain and no distribution network.
And the economics of the unit holder are a different story. After financing and tax, $30.1 million remained out of $119.1 million of revenue - about a quarter. Still good, and a long way from 69%.
And this is the reminder I take: in any business built on an asset funded with debt - a gas field, income-producing property, infrastructure - the operating margin describes the asset, not whoever holds it. Between the two stand the lenders.
And what I would look for in the full accounts is the repayment schedule: the pace at which the debt is retired. As it is repaid, that 53.5% shrinks - and the profit to the unit holder grows without anything in production changing. That matters more than any gas-price forecast for the coming quarter.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
