There’s no doubt that the energy sector has been a virtual minefield this year. With the Dow Jones Industrial Average hitting fresh highs, you would think just about any energy company would be doing well, but some are performing spectacularly while others are in a deep funk.
I’ve done a lot to tell you how I try to separate the wheat from the chaff, the great potential runners like Anadarko and EOG resources and avoiding the slowpokes like Devon energy, BP and SandRidge.
One name that continues to excite me was Noble Energy (NBL). I was talking to a fellow trader yesterday about Noble and specifically cited its mostly ignored but, I believe, game-changing investment in the Leviathan offshore project in the Mediterranean Sea off of the Israeli coast. This morning, Noble released a report showing just how spectacularly this project is moving along. With the recent moderation in Noble shares over the past several days bringing the price below $110, I am reiterating my recommendation. Now would be a great time to either begin or increase your exposure to Noble.
Leviathan has been much ignored because it is almost entirely natural gas and will affect only the markets surrounding the Eastern Mediterranean; Turkey, Italy and Greece. But here's the thing: Europe isn’t the US and Natural gas is good in these markets, spectacularly so: Italy and Greece are two of the more expensive local markets in Europe with prices almost three times higher than here in the U.S. With natural gas dependency in Europe almost two-thirds tethered to Russian and Norwegian supplies, a new player for substantial natural gas reserves could be a game changer. This could adjust the power in southern Europe away from the less reliable Russians and, surprisingly, toward the less-favored Israelis. Imagine what that the geopolitical implications would be in that area.
And Noble is at the center of it. It is an exciting prospect that no other energy company shares.
Noble’s other major development is in the tight oil Niobrara shale play in Northern Colorado. It is another energy opportunity which goes almost unmentioned when talking about US crude plays and Noble has this one dominated. They recently reported a planned increase of over 400 new wells in the Niobrara, where they are continuing to hit a high percentage and can operate ever more closely together. The Niobrara will continue to be a Noble home run.
Weeks ago, I recommended Noble when the shares were trading at $97, and then I watched it climb close to $120. At that point, I took some profits on one-third of the shares. Now, despite a terrific quarterly report, the stock has slumped below $110 again. It seems to me that the initial move from Noble from under $100 a share was a bit too much, too fast and the subsequent dive had nothing to do with its report -- a 20% gain in just a few weeks' time is enough to drive plenty of profit-takers in, including me.
But now's the time to reload, particularly on the back of this new, very promising release from the company on this exciting ongoing development in the western Mediterranean Sea. Therefore, I am reinforcing my recommendation to buy Noble Energy at $110 a share today.