Barclays sees today's sell-off of Israel energy stocks as overdone. "The sell-off seems overdone to us, for a two main reasons," Barclays writes in a note to investors rleased this afternoon. The first reason is that "the non-binding letter of intent signed between Leviathan Partners and BG International in June 2014 is for the supply of natural gas to the BG’s Liquefied Natural Gas (LNG) facility though a dedicated subsea pipeline. This is designed for LNG exports and does not seem to conflict with the local gas supply in Egypt.
The second reason Barclays cites is that "Shares of Leviathan’s pure-play Ratio Oil are currently down about 20% and imply a field value of $4.4 billion. We believe this valuation completely discounts any future exports from the field and we do not view this as realistic. This morning Delek Group reported its second quarter 2015 results and on the analyst call management said that it is not concerned about the recent newsflow and, in general, all export options remain open."
Barclays notes that the Knesset summer recess ends on September 1st and says discussions regarding the regulatory framework will likely resume shortly given that it is a Cabinet priority. "Yesterday, in an interview to local paper Globes, the Minister of Energy said that the global energy industry is quickly evolving and Israel must approve the gas agreement and promote the gas sector. We view the industry as fundamentally attractive, especially after today’s sell-off. However, we continue to remain cautious until the Knesset vote is secured and the full details of the are published," Barclays concludes.
Published by Globes [online], Israel business news - www.globes-online.com - on August 31, 2015
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