The current value of the Leviathan gas field is $4.9 billion, Clal Finance analyst Yaron Zer believes. In a research survey published today, he estimates that the amount required to develop the Leviathan field is close to $18 billion, far higher than previously believed.
The Leviathan partners Delek Group Ltd. (TASE: DLEKG) units Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling Limited Partnership (TASE: DEDR.L), Noble Energy Inc. (NYSE: NBL), and Ratio Oil Exploration (1992) LP (TASE:RATI.L) recently agreed to sell 30% of the field to Australia's Woodside Petroleum Ltd. (ASX: WPL) for $1.25 billion, reflecting a value for Leviathan of $4.8 billion.
Woodside will be in charge of building an Israeli liquefied natural gas (LNG) facility for gas exports and Zer believes that, "it is reasonable to assume that the Israeli partners will find it hard to finance their share in building the LPG infrastructure and may lower their stake in favor of Woodside."
The bottom line, Zer thinks, is that Delek Drilling Avner and especially Ratio's shares are overpriced. "The prices are based on optimistic assumptions. Pricing does not taking into account regulatory risks like freezing the Zemach Report (on gas exports) or declaring Leviathan a cartel, and the possible break down of the Woodside deal."
Zer believes that the Leviathan partners will be required to pay income tax as well as the Sheshinski tax in contrast to the analysts' consensus which ignores this. He believes that the Tamar reservoir is worth $15.1 billion before tax and $11.7 billion after tax. Tamar contains about 50% the amount of gas in Leviathan, however almost the entire required $3 billion investment has already been completed and the field will begin producing gas next month. Zer values the Mary B Yam Tethys field at $403 million before tax, and Cyprus' Block 12 field at $1 billion.
Zer expects the Tzemach recommendations on exports to be approved by the government so that exports will not be harmed. The report recommends that Israel export up to 50% of gas, thus keeping reserves for some 25 years.
Published by Globes [online], Israel business news - www.globes-online.com - on March 6, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013