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July 9, 2012, 9:52 a.m. EDT

Isramco Negev 2 fuels interest from analysts

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By Robert Daniel, MarketWatch

Noble Energy and partners
An illustration of the offshore Tamar natural-gas project off northern Israel.

TEL AVIV (MarketWatch) — Isramco Negev 2 LP, one of the key companies developing huge natural-gas reserves off northern Israel, got a boost from two prominent securities firms recently.

At Barclays Capital, analysts David Kaplan and Lydia Rainforth raised their rating on the stock to overweight from underweight and their price target by more than half, to 0.69 shekel ($0.17) a share from 0.44. Analyst Michael Klahr at Citigroup affirmed Isramco as his top pick among Israeli exploration-and-production companies with a target price of 0.79 shekel.

Explorers led by Houston’s Noble Energy Inc.  are developing some major energy fields for the country.

Kaplan and Rainforth raised their rating on Isramco  given that production from the Tamar gas field is expected to begin in the second quarter of 2013, supply contracts with Israel’s electric utility are approved by the government and in place, and financing is secure.

“Isramco has a 29% working interest in Tamar, which is world scale at 9 trillion cubic feet, and stands to be the major beneficiary from the initiation of gas supply,” they wrote.

The developments are positives as well for Delek Group and three publicly traded subsidiaries, Avner Oil & Gas, /zigman2/quotes/206763019/delayed AVOGF 0.00%   Delek Drilling  and Delek Energy , they wrote.

Among the four, Kaplan and Rainforth particularly like parent Delek Group IL:DLEKG +0.57%   because of its diverse energy portfolio and 50%-dividend-payout strategy. And the three subsidiaries are limited partnerships, with more complex tax calculations, while Delek Group is a corporation and doesn’t face that issue, the analysts said.

The two analysts also affirmed an overweight rating on Ratio Oil Exploration LP , a partner in developing the Leviathan field, which the analysts call “one of the largest natural-gas discoveries globally in the past decade.”

The analysts expect the current developers of Leviathan to bring in an additional strategic partners to help market the production, they said.

But they cut their price target on Ratio shares to 0.45 shekel from 0.56. That’s because drilling has been halted in a deep oil target in the Leviathan field and might not resume until late in 2013; and it’s unclear how much of the production from the field will be cleared by the government for export, the analysts wrote.

Late in trading Monday on the Tel Aviv Stock Exchange, Isramco shares were quoted near 0.45 shekel a share. Ratio Oil was quoted at 0.25 shekel.

Field offshore Ashkelon

Klahr at Citi focused his note on Isramco’s announcement that drilling at a field in shallow water offshore Ashkelon in the center of the country had reached its target and confirmed “substantial signs of natural gas.”

The partnership drilling here still must confirm the so-called Shimshon field as a discovery and then test the pressure and composition of the gas, the analyst wrote. The field holds some 2.3 trillion cubic feet of gas.

Isramco holds 60% of the Shimshon field, while ATP Oil & Gas Corp. ATPG of Houston holds 40%. Delek Group and Noble Energy aren’t involved in the Shimshon field.

By itself, Shimshon adds little to the Isramco investment case, but it helps highlight the Levant basin as a major gas producer, Klahr wrote.

Nonetheless, Isramco will benefit as the Tamar field comes on line and if the government enables the developers to export more gas, he wrote. The interim recommendations of a government panel are to enable the developers to export half the production from the major fields, Klahr wrote.

US : U.S.: OTC
$ 0.00
0.00 0.00%
P/E Ratio
Dividend Yield
Market Cap
Rev. per Employee
IL : Israel: Tel-Aviv
+3.20 +0.57%
Volume: 109,626
Sept. 28, 2023 12:00a
P/E Ratio
Dividend Yield
Market Cap
₪10.14 billion
Rev. per Employee

Robert Daniel is MarketWatch's Middle East bureau chief, based in Tel Aviv.

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