After Israel Land Development Company Energy Ltd. (TASE: IE) share price fell 44% since the 3D seismic results for the Myra and Sarah gas fields offshore from Netanya were published on Thursday, DS Brokerage today recommended that investors buy the shares of the licensee controlled by Ofer Nimrodi and the shares of Modiin Energy LP (TASE:MDIN.L), controlled by Nochi Dankner and Tzahi Sultan.
DS analyst Amir Foster examined how to give a valuation to the gas in the Myra and Sarah fields by looking at the adjoining Leviathan gas field. After working out the valuation, DS gave a target price of NIS 2.84 per share for ILDC Energy, a 134% premium, and NIS 6.6 per share of Modiin, a 41% premium.
The survey by Netherland Sewell & Associates Ltd. (NSAI) found that that the fields have 6.5 trillion cubic feet of natural gas with a 54% probability of geologic success and 150.7 million barrels of oil with an 18% probability of geologic success. What has been worrying investors is the huge difference between the low estimate of 673 billion cubic feet of gas for Myra and Sarah and the 16.2 trillion cubic feet of the high estimate, while the best estimate is just 2.9 trillion cubic feet - 55% less than the gross mean reserve of 6.5 trillion cubic feet.
But DS Brokerage calculates that ILDC Energy's current market value is as if there was only a 22% probability of finding 6.5 trillion cubic feet and thus concludes, "Buying ILDC Energy's share is by all statistical parameters like buying a lottery ticket cheaply."
ILDC Energy's share price was up 15.18% on the TASE this afternoon to NIS 1.31. Modiin's share price was up 8.9% to NIS 0.05.
Published by Globes, Israel business news - www.globes-online.com - on July 5, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011