Noble Energy Riding High on Levant Largesse

The way things are going, when you think about the Levant Basin these days, you think about Houston-based Noble Energy.

The company has made yet another discovery offshore Israel near its Tamar field holdings, where production began in late March, setting the company on course for another stellar year.

Last week, Noble announced a new discovery in the Mediterranean Sea, just 20 miles northeast of its Tamar field in its Karish well after drilling to a total depth of 15,783 feet. The well encountered 184 feet of net natural gas pay, and Noble thinks it potentially holds up to 2 trillion cubic feet of natural gas.

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That brings its estimated combined resources in the Levant Basin-including the Tamar and Leviathan fields-up to 38 trillion cubic feet of natural gas.

Noble is definitely on a role in the Levant Basin, and this latest discovery is its 7th so far in the eastern Mediterranean.

Noble is the operator of the Karish well license area, with a 47% stake. Avner Oil and Delek Drilling also have stakes in the license. 

Where will all that gas go, especially now that Tamar has begun producing? Tamar gas will likely be used for the domestic Israeli market, while Leviathan and other discoveries will eventually head to international markets, once Israel maps out its export plan.

Israel hopes to become a gas exporter by the end of this decade, but officials are still debating how this export map should look. Specifically, they are considering a proposal that offers up 53% of Israel's gas for export, but only after the domestic market has secured a 25-year supply. Companies like Noble, though, are growing impatience with Israel's indecision, so the pressure in on.

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On a geopolitical level, all this Israeli gas could remap Middle East politics, either for better or worse. Who Israel sells its gas too, especially among some of its gas-starved neighbors, will be a significant foreign policy move.

But there is another issue rankling Noble amid all of its amazing discoveries: Already in 2010 when the discoveries were made, Israel reset its tax and royalty rates. Then in mid-April, there were hints of more of this to come now that Tamar has begun producing. Israel's new Finance Minister Yair Lapid said that the government was considering another new tax structure through the creation of a public panel on the issue. Noble was less than pleased.

In the meantime, though, it's mostly good news for Noble since it made that first major discovery in Cyprus in 2011-which really got our attention-in Block 12, which holds an estimated 8 trillion cubic feet of gas. This was followed by Leviathan, which should start producing before the end of this decade, and Tamar, which is already on line.

Last week, Noble hit another 52-week high, and the first quarter of this year saw dividends increase 12%.

By. Charles Kennedy of Oilprice.com