"The oil and gas industry will again stand out in 2011, after outperforming the market in 2010," says Clal Finance Ltd. in its Tel Aviv Stock Exchange (TASE) review. Analyst Yuval Ben-Zeev's stock pick for the sector is Leviathan and Tamar partner Avner Oil and Gas LP (TASE: AVNR.L).
Ben-Zeev said, "We were very optimistic about the sector, which accounts for 7% of the Tel Aviv 100 Index… This is a high-risk and volatile sector, but its potential cannot be ignored. The development of the industry, which is rich in profits, cash, and dividends will grow rapidly in the coming years."
Ben-Zeev believes that Israel's natural gas consumption will triple within a decade. "The gas revolution has already arrived," he says.
Ben-Zeev tempered his enthusiasm, saying, "The exploration results are liable to be disappointing compared with the expectations. Development of marketing and export infrastructures is necessary to realize the great potential, and the implementations of the Sheshinski committee recommendations in full are a risk factor for investors."
Ben-Zeev advises investors to overweight oil and gas exploration shares and to diversify holdings in several companies in order to spread the risk.
Clal Finance's recommendation is the opposite of Psagot Investment House Ltd. last week, which warned on gas exploration shares, giving them an "Underweight" recommendation. It explicitly warned that investors were not taking into account the effect of the Sheshinski committee recommendations.
Published by Globes [online], Israel business news - www.globes-online.com - on January 2, 2011
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