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Noble Energy to Expand Natural Gas Operations in Israel

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Noble Energy Inc. (NBL - Free Report) has announced plans to strengthen and expand in Israel through production operations ahead of the 2019, according to a report by Reuters. The production operations will begin at the large Leviathan natural gas site close to Israel's Mediterranean coast at the end of 2019.

Per another media report, the company is leasing nine floors in the Herzliya Hills office project, to support its expanding operations and increasing work force in Israel. Noble Energy will lease the offices for 10 years with an option to extend the lease by a further 14 years. The company will move into its new Herzliya Hills offices in 2019.

Noble Energy’s Position in Israel

The company already holds 40% of Leviathan gas site, which has estimated gas reserves of 622 billion cubic meters, while Delek Group Ltd. owns 45% of the same through subsidiaries. Additionally, Noble Energy holds 32.5% of the Tamar field, Israel's primary reserve of natural gas.

Noble Energy is currently focused on strengthening operations in Israel. Notably, the company has spent 20% of the capital expenditure toward development operations for the Leviathan development, during the third quarter. At present, Noble Energy has gained the required permission to progress with the remaining of its Leviathan development work of which 23% has been already completed.

During the third quarter, the company witnessed a rise in gross recoverable resources by 10% to 11 trillion cubic feet equivalent (Tcfe) of natural gas in the Tamar Field. Further, higher gas demand was also witnessed owing to the addition of more industrial customers in Jordan during the third quarter.  It was also aided by demand from Israel due to the government mandate of reducing coal-fired power generation.

Going ahead

Noble Energy expects to invest in the range of $600-$700 million in the fourth quarter. Additionally, natural gas volumes are anticipated higher at 1,005-1,045 million cubic feet of natural gas per day while natural gas liquids (NGLs) are expected to be between 69 thousand barrels per day (MBbl/d) and 74 MBbl/d.

Further, the possibility of extracting higher gas volumes in existing assets of the Tamar Field is expected to bode well with the growing demand of natural gas in Eastern Mediterranean region. However, the company will have to reduce its holding in Tamar field to 25% by 2021 as government plans to open the market to competition.

Per management’s opinion, higher recovery of gas from Leviathan at the end of 2019 and the continued operations in Tamar are expected to boost Noble Energy's operations in Israel. Along with operations in Israel, its operations in Big Bend, Dantzler and Gunflint fields in Gulf of Mexico, West Africa and Equatorial Guinea are expected to aid the company in achieving production target for 2017.

Price Movement

Noble Energy has underperformed the industry in last six months. The company’s shares lost 2% against the industry’s gain of 19.8%.

Zacks Rank & Stocks to Consider

Noble Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the sector include ConocoPhillips (COP - Free Report) and Continental Resources, Inc. (CLR - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ConocoPhillips delivered an average surprise of 152.34% in the trailing four quarters. Its 2018 Zacks Consensus Estimate is pegged at $2.25 per share up 294.7% year over year.

Continental Resources delivered positive average earnings surprise of 69.45% in the last four quarters. Its 2018 Zacks Consensus Estimate is pegged at $1.33 per share up 280% year over year.

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