UBS has raised its target prices, while reiterating its recommendations for Tamar and Leviathan partners, following the presentation by Noble Energy Inc. (NYSE: NBL) of its operations, including in the eastern Mediterranean.
UBS analysts Roni Biran and Ziv Tal added Noble Energy's Block 12 concession in Cypriot waters into its net asset valuations (NAV) for the company's Israeli partners - Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L), which have 15% options each in Block 12 - on the basis of assuming unrisked valuation of $2.5 billion and risked valuation of $766 million. The assumption is based on 6 trillion cubic feet (TCF) of natural gas at $2.60/barrel of oil equivalent (similar to Leviathan), and a 60% geological probability. The estimate does not include possible synergies with Leviathan. The analysts also raised their resource estimates on to reflect recent exploration data in smaller licenses, such as Dolphin (Hanna), Tanin (Alon A), Dalit, and Noa.
UBS adds that Noble Energy also pointed to an exploration upside of over 20 TCF potential within its acreage in the Levant Basin (including Block 12). Delek's partner in Leviathan Ratio Oil Exploration (1992) LP (TASE:RATI.L) and its Tamar partner Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) hold additional licenses. As exploration de-risking continues to unfold, undiscovered resource still offers significant upside to our model. UBS also believes that an export model and a contract with Israel Electric Corporation (IEC) (TASE: ELEC.B22) could lead to significant reduction of commercial risks. A floating liquefied natural gas (FLNG) terminal scenario for Tamar is another potential upside.
Biron and Tal raised their NAVs for Delek Drilling by 16% and for Avner by 15%. They raised their target price for Avner to NIS 2.90 from NIS 2.50, for Delek Drilling to NIS 16.30 from NIS 14, for Ratio to NIS 0.49 from NIS 0.45, and for Isramco to NIS 0.49 from NIS 0.45. They reiterated their "Buy" recommendations for Avner, Delek Drilling and Ration, and "Neutral" recommendation for Isramco. Avner is their stock pick for the sector
Avner's share price fell 0.4% in morning trading to NIS 2.32, Delek Drilling's share price fell 0.8% to NIS 13.43, their parent company, Delek Group Ltd. (TASE: DLEKG) share price rose 0.1% to NIS 826, Isramco's share price fell 1.1% to NIS 0.46, and Ratio's share price rose 0.8% to NIS 0.38.
Published by Globes [online], Israel business news - www.globes-online.com - on November 17, 2011
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