Noble Energy Inc. (NBL - Analyst Report) announced that it has entered into a gas sales and purchase agreement (GSPA) to supply natural gas from the Leviathan fields to Jordan’s National Electric Power Company Ltd. (NEPCO) for electricity production.
Terms of the Agreement
Under the GSPA, Noble Energy and its Leviathan partners will supply a gross quantity of nearly 1.6 trillion cubic feet (Tcf) of natural gas from the gas field, which translates into 300 million cubic feet per day (MMcf/d), over a 15-year period. NEPCO also has the option to purchase an additional 50 MMcf/d, bringing the total to 350 MMcf/d.
Gross revenue from the deal is expected to touch $10 billion. This is the first export GSPA for the Leviathan field and including the Israel sales contracts, it brings the total contracted volumes to the range of 400–450 MMcf/d.
Another GSPA in Leviathan
Noble Energy has signed another GSPA to supply natural gas from the Leviathan field to Israel’s IPM Beer Tuvia Ltd (IPM). Per the GSPA, Noble Energy and its Leviathan partners will supply a gross quantity of up to 473 billion cubic feet of natural gas to IPM over a period of 18 years. Total gross revenue under the contract is estimated to exceed $2.5 billion.
The Leviathan Field
The Leviathan field, a high-quality resource located in offshore Israel, has an estimated 22 Tcf of recoverable natural gas resources. Noble Energy with its 39.66% working interest is the major operator of the field. Other owners include Delek Drilling with a 22.67% interest, Avner Oil Exploration with a 22.67% interest, and Ratio Oil Exploration (1992) Limited Partnership with a 15% interest.
Natural gas has been witnessing growing popularity of late, thanks to its clean burning nature, and is on the way to replace coal as the primary source of fuel for generating electricity. Going forward, the Israeli government’s focus on reducing coal-fired power generation will boost sales to the country and drive demand for natural gas supplied by Noble Energy.
The Leviathan field provides Noble Energy and its partners the opportunity to leverage the growing demand of natural gas in the region.
Thus, Noble Energy is focused on developing this high-quality resource, and in its endeavors, the company received regulatory approval to build a fixed platform for the Leviathan field. Noble Energy believes that a fixed platform will allow it to expand the scale of operations as required. The platform’s initial capacity is anticipated to be 1.2 billion cubic feet of natural gas per day (Bcf/d), which can later be expanded to 2.1 Bcf/d. (Read more:Noble Gets Regulatory Nod to Build Leviathan Platform)
Noble Energy, with its domestic and international assets, is reasonably well positioned to benefit, despite the ongoing weakness in commodity prices. The company’s cost reduction initiatives and steady stream of orders from both international and domestic customers have been acting as growth catalysts.
Zacks Rank & Key Picks
Noble Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the Oil and natural gas industry are Evolution Petroleum Corporation (EPM - Snapshot Report) , Rice Midstream Partners LP (RMP - Snapshot Report) and GeoPark Limited (GPRK - Snapshot Report) .
Evolution Petroleum’s earnings estimates witnessed an increase of 2.9% to 35 cents for fiscal 2016 over the last 60 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Rice Midstream Partners’ earnings estimates witnessed an increase of 21.6% to $1.41 for 2016 over the last 60 days. The company carries a Zacks Rank #2 (Buy).
GeoPark Limited’s loss estimates narrowed to 26 cents from $1.09 for 2016 over the last 60 days. It has a Zacks Rank #2.
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