Israel's analysts weigh in on the news that Tamar natural gas reserves are larger than previously estimated.
"180 billion cubic meters isn't the end," says Clal Finance analyst Gal Reiter. "There could be a further update, though not a dramatic one."
The partners in the Tamar prospect - Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Dor Gas Exploration Ltd. - will now hire a special consultancy firm to assess the value of the reservoir. The results will be known in two weeks. On the basis of the estimate, for the companies will secure financing and formulate a development budget.
Reiter adds, "The addition or potential value will mainly come from progress in the project and the decline in the risk level. The Dalit drilling will begin in 2012-13, and the Tamar drilling will begin in 2015-16. As the project progresses, there will be more data, the risk level will fall, and the potential value will rise."
Reiter gives Delek Group subsidiaries Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L) "Outperform" recommendations. He gives Delek Drilling a target price of NIS 5.72, which is 8.3% less than today's opening price, and he gives Avner Oil a target price of NIS 0.98, a 2.1% premium on today's opening price. He gives Isramco a higher, "Buy" recommendation, with a target price of NIS 0.46, a 19.5% premium on today's opening price. He is still working on a recommendation and net asset value (NAV) for Delek Group; the current recommendation is "Market perform".
Leader Capital Markets analyst Yoav Burgan believes that the shares of the Tamar partners have strong upside potential. He estimates the value of the Dalit and Tamar prospects at $5.4 billion, reflecting potential upsides for the partners of 52-103% on today's opening prices.
Burgan told "Globes", "Even now, Noble Energy is talking about the average potential estimate; in other words, we haven’t yet had a statement about the proven natural gas reserves. There is definitely room for a favorable impression from the large upgrades since the beginning of the year. The partners' first estimate was 88 billion cubic meters. In February, they talked about 142 billion cubic meters, and the figure has now risen to 180 billion cubic meters. The reservoir is very large, even on a global scale."
Burgan adds, "The potential upside from today's base prices for each of the partners is 103% for Isramco, 72% for Delek Energy Systems Ltd. (TASE: DEOL), 60% for Delek Drilling, 56% for Avner Oil, and 52% for Delek Group."
Burgan says that share movements precede the economic value and sales, and predicts that investors will begin to see the actual results in 2013.
Burgan gives Delek Group a "Buy" recommendation and he raised his target price by 14.5% to NIS 767, a 46.5% premium on today's opening price.
IBI Investment House analyst Ori Licht believes that the Tamar partners will begin pumping natural gas from the prospect in 2015, and raised several still unanswered questions: what will be the rate of production from the fields?; what will be the prices in the gas supply contracts?; and will the partners create a global business for gas exports, and if so, how? He notes that the answers to these questions will greatly affect the value of the Tamar prospect and the companies' share prices.
Published by Globes [online], Israel business news - www.globes-online.com - on July 8, 2009
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