Barclays Capital is unimpressed by the natural supply contracts signed by the Tamar partners, saying that the exploration at Leviathan will have greater impact on the near term returns. It says that the gas contracts are already priced into the valuations of its Israeli partners, Delek Group Ltd. (TASE: DLEKG) units Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L), and Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L).
Barclays notes media reports that the Homer Ferrington is due to leave Cypriot waters (where it drilled the Block 12 exploratory well), and return to Israeli waters, where it will drill a new well to the deep oil targets which Noble Energy Inc. (NYSE: NBL) says hold a gross unrisked potential of 3.7 billion barrels of oil equivalents.
Barclays says that while the Tamar agreements are positive and lower the reservoir's risk asset and will help with funding for the field's development, "the new agreement will not generate cash flow prior to 2014." It adds, "Once the drilling at the Leviathan deep wells is complete by mid 2012, the focus will shift to cash flow generation that favors Tamar. Tamar is expected to begin commissioning gas by the end of 2012 with first production in early 2013."
Barclays says that Ratio has the greatest dependence on the success or failure of Leviathan, while Avner and Delek Drilling are more diversified, and Isramco is dependent on Tamar.
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2012
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