Analysts see no harm to Leviathan without Woodside

Leader Capital Markets: Regional development lowers costs and raises risks.

Analysts have been reacting this morning to the news that Australian company Woodside Petroleum has withdrawn its intention to buy 25% of the rights in the Leviathan gas field off Israel's coast for $2.71 billion.

IBI Investment House analyst Guil Bashan who specializes in the energy sector told "Globes," "We are not talking about such terrible news. Beyond the level of sentiment that can have a certain disappointment, the possibility has opened up for more regional development with a higher value than Woodside was bringing to the planned agreement. Valuations from the beginning did not take into account the Woodside deal. Therefore, there is no harm done to the value of the field nor to its development capability because the main development is focusing on the pipeline to markets nearby which Noble Energy can implement."

Bashan added, "Ratio is the most disappointed from the deal mainly from the point of view of financing because it will now need to raise equity sources in order to meet its part in developing the field."

Leumi Capital Market senior analyst Ella Fried said that, "Delek Group Ltd's. (TASE: DLEKG) recent debt raising at very convenient interest rates leaves it well placed to develop Leviathan . The financing risk has risen slightly and regional development raises the risk. So there is no great influence on Delek Group but Ratio will be under financing pressure in the initial stage."

Psagot Investment House Ltd. analyst Noam Pinko stressed that the deal fell because of a strategic decision to concentrate on the regional market and not due to any fault of the government. "Woodside's advantage is only in FLNG floating liquid gas and it does not mean that there won't be any liquid gas. The services of other companies can be used like the Tamar agreement with South Korea's Daewoo. From the financing point of view, Woodside would have put more than a billion dollars in but it won't be a problem to finance Leviathan due to the frenzied demand in Delek's recent overseas offering. Furthermore, the Delek partnerships can sell a small piece of the field to a financial rather than strategic player to meet the equity required to develop the field, and probably at a higher price than agreed with Woodside. Regarding Ratio, it will have to bring in a partner. Delek is indicating that everything is fine, and the value is higher than that given to Woodside."

Leader Capital Markets analyst Elad Kraus said, "The first point is the financing issue. Woodside was supposed to assit greatly in financing Leviathan's development. From the development point of view the regional market has now opened up and on this Leviathan's development will be based. The cost of development will be lower but the risk will rise without the flexibility of liquid gas that can be sold anywhere."

Published by Globes [online], Israel business news - - on May 21, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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