"Delek Energy Systems Ltd. (TASE: DEOL) and its subsidiaries Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) will likely fall 26%," states Psagot Investment House Ltd. in a special review today, following yesterday's announcement that the Leviathan reserves are as large as previously estimated.
Psagot gives Avner a target price of NIS 1.92, Delek Drilling NIS 10.56, and Delek Energy NIS 1,092. It also gives the parent company Delek Group Ltd. (TASE: DLEKG) a "Market perform" recommendation with a target price of 839, compared with today's opening price of NIS 942.
"The world's greatest deepwater discovery of the past decade strengthens the confidence of more potential discoveries, and will probably bring the Israeli economy to an era of exports," says Psagot as it raised its estimated value of Leviathan to $5.3 billion from $3.8 billion.
"As for the original valuation, the capitalization rate was lowered to 13%, but the recommendations of the Sheshinski committee were partly weighted (50%). It should be noted that under the current tax regime, the estimated value of the reserves is $6.5 billion."
Psagot explicitly says that investors in the companies are not taking into account the likely impact of the Sheshinski committee. "In practice, the companies are traded on the basis of a scenario, which assumes that there will be no change in the tax regime… We therefore reiterate our "Underperform" recommendations and advise exploiting the rise [in the shares' prices] to reduce holdings."
Yesterday, Noble Energy Inc. (NYSE: NBL) and the Israeli partners in Leviathan announced that the first target strata contains 16 trillion cubic feet of natural gas.
In morning trading today, the share prices in all the Israeli partners in Leviathan corrected downward from yesterday's gains. Delek Group's share price fell 2.4% by midday to NIS 919.70, Delek Energy's share price fell 4.1% to NIS 1,418, Avner's share price fell 3.2% to NIS 2.50, Delek Drilling's share price fell 1.3% to NIS 14.18, and Ratio Oil Exploration (1992) LP's (TASE:RATI.L) share price fell 4.1% to NIS 0.55.
Published by Globes [online], Israel business news - www.globes-online.com - on December 30, 2010
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