Unexpected technical problems have emerged in the Block 12 concession in Cypriot waters, admits Noble Energy Inc. (NYSE: NBL) Chairman and CEO Charles Davidson. However, Davidson claims that these problems will not affect drilling chances for success.
In the Noble Energy third quarter 2011 earnings conference call, Davidson said that in addition to drillings that have already been announced, "Noble Energy plans to embark on at least two more exploratory drillings in Israel."
Block 12, which is located 33 km north of the Leviathan discovery, is the largest gas installation in Noble Energy's licensed area that has not yet been drilled. According to estimates, Block 12 holds about 10 trillion cubic feet of gas, slightly more than the Tamar discovery and smaller than the Leviathan discovery.
Yitzhak Tshuva's Delek Group Ltd. (TASE: DLEKG) units Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L), have an option to acquire 30% of Block 12, conditional upon receiving Cypriot government approval.
Noble Energy's exploratory drilling in Block 12 began in late September, and achieved media attention following the Turkish government's threats to attack the drill site. "Globes" reported last week that pockets of water are hampering drilling by the Homer Ferrington rig in Block 12, and that these pockets of water will probably delay completion of the drilling by a month - from November to December. Similar problems occurred at the Leviathan 2 well.
In the conference call, Davidson was asked, "Is the media report that Noble Energy has run into problems accurate?"
"We are experiencing a highly stressful situation which has forced us to increase the weight of the mud and to move up the casing date," said Davidson. "This difficulty made it imperative to make small alterations, but no real changes." Davidson refrained from saying which difficulties will cause a delay in completion, but at another point in the conversation he said drilling will be finished by the end of the year.
Davidson spoke in detail about the possibility of exporting gas from Israel. "We assume that all of the gas extracted from Tamar will serve the Israeli domestic market, as well as a portion of the gas from Leviathan. The remainder will be exported. A committee, headed by Shaul Tsemach, has been appointed to examine the export issue, and we are providing the committee with information. Domestic consumption is a very good thing. We have discovered a very large amount of gas in the area and therefore it is extremely important to make a decision as soon as possible."
Noble Energy's net profit rose to $441 million for the third quarter of 2011, from $232 million in the corresponding quarter of 2010. Revenue rose 39% to $924 million.
Noble Energy also reported that sales of natural gas in Israel, from Yam Tethys, which it owns with Delek, has reached a peak having risen 28%. Noble Energy owns 40% of the Leviathan license, 36% of the Tamar license and 36% of the Dalit license, which are located in Israeli economic waters.
Published by Globes [online], Israel business news - www.globes-online.com - on October 23, 2011
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