The share prices of Myra and Sarah licensees Israel Land Development Company Energy Ltd. (TASE: IE) and Modiin Energy LP (TASE:MDIN.L) fell 22.8% and 19.4% today, after the companies announced that the fields have 6.5 trillion cubic feet of natural gas with a 54% probability of geologic success and 150.7 million barrels of oil with an 18% probability of geologic success.
The share prices of two companies that are due to buy into the Myra and Sarah licenses, Premium (PIH) Holdings Ltd. (TASE: PIH), controlled by Yuli Ofer, fell 13.5% to NIS 1.23, and Shaldieli Ltd. (TASE: SHDL-M), fell 29.5% to NIS 1.34.
The plunge in the companies' share prices following the announcement came after they soared in the run-up to it, and confirms the old adage, "Buy on rumor, sell on fact". But there may be a more profound reason: the market worries that the discovery is actually much smaller than the companies say.
What worries investors is the huge difference between the low estimate of 673 billion cubic feet of gas for Myra and Sarah and the 16.2 trillion cubic feet of the high estimate, while the best estimate is just 2.9 trillion cubic feet - 55% less than the gross mean reserve of 6.5 trillion cubic feet that ILDC Energy, Modiin Energy and their partners focused on.
The market is therefore waiting for the results of the exploratory well, which will begin drilling in January 2012, which will give a more precise figure for the fields' gas reserves and narrow the current range. Until then, the uncertainty about the licenses will remain high, and the capital market does not like uncertainty.
IBI Investment House analyst Gil Bashan says, "There is a risk that the quantities are low because of the range between the high estimate and the best estimate is so large. After the exploratory well, and assuming that there is a discovery, and if the best estimate is revised to less than the gross mean resources, there could be a disappointment."
Published by Globes [online], Israel business news - www.globes-online.com - on June 30, 2011
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