Current NBL Stock Info

Update:
Jordan wants to wait until anti-trust decision is made before proceeding with Noble deal
Jordan suspended talks to import natural gas from Israel from Noble Energy (ticker: NBL) and will instead sign an agreement with BG Group (ticker: BG) to buy Gaza Strip gas.

The kingdom halted negotiations after news that the Israeli anti-trust regulator might recommend breaking up Noble's interest in the Leviathan offshore field with its partners Delek Group, according to Jamal Qammouh, head of Jordan's Lower House energy committee, reports Bl...

Analyst Commentary

NBL Update
$41.52, EQUALWEIGHT, $52.00 Target
Cutting NAV est to $52 from $57 on reduced valuation for Leviathan. Uncertainty surrounding the project has increased significantly since Dec 23 when the Israel Anti-trust Authority surprisingly withheld the consent decree to the Anti-trust Tribunal for final approval of the project. Most had assumed final approval was a foregone conclusion given a March 2014 agreement that included the divestiture of two gas fields by NBL and its partners. We now ascribe a bigger risk factor to NBL’s 40% stake in the project, valuing it at $2.4B (~$7/sh) vs $4.4B (~$12/sh) previously. Meanwhile, NBL plans to issue 2015 guidance when it reports 4Q results on Feb 19. NBL targets scaling its budget down to levels near expected CF. Based on our $60/bbl price deck for 2015, we estimate ~$2.8B of CF. We assume ~$3.2B in CAPEX, down ~35% y/y from ~$4.8B last year. This implies a modest ~$400MM outspend. NBL mentioned it may pursue some small asset sales and may look to MLP some or all of its DJ Basin midstream assets, so CAPEX may be higher than our forecast. NBL noted the most obvious area to cut given the recent developments would be Eastern Med. Spending will also likely be cut on exploration and some long lead time development projects (Katmai, Diega). In the DJ Basin, NBL wants to maintain operational efficiencies but acknowledged it may cut activity. Based on our CAPEX forecast, we expect production to average 335 Mboe/d, +12% y/y (or +2% from 4Q14 to 4Q15). Our estimate is 1% below the Street’s 338 Mboe/d est. For 2016, we expect growth to be flat y/y at 334 Mboe/d, which is 10% below the Street’s 386 Mboe/d est. On our current 2015/2016 estimates (which assume $60/bbl WTI in both years), NBL trades at EV/EBITDA multiples of 6.5x/8.0x. Excluding hedging gains in both years, these multiples expand to 8.4x/8.8x. More below. (Johnston)

Leviathan Update: Uncertainty surrounding the 22 Tcf gas development project offshore Israel has increased significantly since Dec 23 when the Israel Anti-trust Authority surprisingly withheld the consent decree to the Anti-trust Tribunal for final approval of the project. Most had assumed final approval was a foregone conclusion given that NBL and its partners reached a written agreement with the Anti-trust Authority in March 2014 that included the divestiture of the Tanin and Karish gas fields. NBL and its partners need antitrust clearance (as well as a number of other approvals from Israel including export approvals, inter-country contract agreements, etc) before Leviathan can be FID’ed. In response, NBL called the actions “another disturbing example of the uncertain regulatory environment in Israel” and noted that final resolution, as well as a number of other regulatory matters, is required before any further investment in Israel.

Subsequent to this development, NBL suspended negotiations with Israel shipyards regarding a 7-yr extension of NBL's lease on the offshore base until there is more clarity on the issue. Furthermore, Bloomberg reported that Jordan suspended negotiations w/ NBL to import gas from Leviathan due to the uncertainty. Recall that NBL signed a non-binding LOI w/ Jordan’s NEPCO in Sept 2014 for 300 MMcf/d over a 15-year period. If the antitrust issue is ultimately resolved, we think that talks w/ Jordan could resume. Next up is a hearing w/ the Anti-Trust Authority, which should occur in the next few weeks. NBL acknowledged that the hearing may not lead to a complete resolution on the issue and that movement may slow heading into the mid-March elections, but the company is hopeful that there is opportunity to resolve the matter between now and YE15.  


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