Israel's Delek Energy agrees to buy U.S. oil firm

TEL AVIV Jan 15 (Reuters) - Israel's Delek Energy Systems DEOL.TA said on Tuesday its U.S. subsidiary agreed to buy Elk Resources of the United States for $95 million, including the rights to a loan that Elk took from a hedge fund.

Delek Energy, a subsidiary of conglomerate Delek Group DELKG.TA, said the deal is subject to completion of due diligence related to the rights to Elk's oil assets.

The Israeli company has an agreement in principle to receive $100 million in credit from a foreign bank to carry out the transaction.

Elk is a private company involved in low-risk oil and gas exploration and production. It has the rights to exploration in 200 square kilometres in the states of Utah and New Mexico.

Elk has proven reserves of 8 million barrels of oil and small quantities of natural gas, as well as probable and possible reserves in areas targeted for exploration. It currently produces 600 barrels per day and Delek plans to substantially increase this amount.

Elk also has a gas pipeline in Utah and under the agreement with Delek, Elk's shareholders will continue to hold 20 percent of the rights to Elk's subsidiary that owns the pipeline.

Delek's subsidiary has a two-year option to buy these rights for $6 million.

Elk had revenues of $8.2 million in the first 10 months of 2007 and a net loss of $15.4 million.

Delek said it expects to invest about $100 million in developing Elk's assets from 2008 to 2010.

"Elk will serve as Delek's operating and managerial platform to expand its activities in the oil and gas exploration and production sector in the United States," Delek said in a statement to the Tel Aviv Stock Exchange. (Reporting by Tova Cohen; editing by Sue Thomas)