Excellence Investments Ltd. analyst Liat Glazer questions the euphoria surrounding Israel oil and gas exploration partnerships, given the risk of investment in their shares. It is not known how the matter of royalties on gas sales will develop, development of the Tamar field is only just getting underway, and the discovery at Leviathan has not been confirmed.
Glazer gives the Tamar license partner Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) an "Overweight" recommendation with a target price of NIS 0.67, a 17% premium on today's opening price of NIS 0.57. She gives Leviathan partner Ratio Oil Exploration (1992) LP (TASE:RATI.L) a "Market perform" recommendation with a target price of NIS 0.36. 12% less than today's opening price of NIS 0.41.
Glazer give the Tamar gas field a value of NIS 7.5 billion, from which she derived Isramco's value, and she gave the Leviathan structure a value of NIS 4.9 billion, from which she derived Ratio's value.
Glazer said that she could not justify Ratio's current market price, because if the Leviathan dream becomes reality, there will be a huge upside to the share, but if the dream blows up, Ratio will be worthless.
Isramco's share price rose 0.7% by mid-afternoon today to NIS 0.576, giving a market cap of NIS 6.14 billion, and Ratio's share price rose 0.7% to NIS 0.413, giving a market cap of NIS 2.8 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on October 25, 2010
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