Leviathan Natural Gas Field May Be Worth 70% More than Estimated
A new deal between Australian company Woodside Petroleum and Noble Energy, based in Texas, has caused Barclays to note that the deal values the Leviathan natural gas field at “71 percent higher than the current market valuation of Ratio Oil’s share price, and 18 percent higher than our current valuation.”
Deutsche Bank expects the stock of Noble Energy to increase 20 percent as a result of the deal. According to the deal, Woodside Petroleum will make an initial payment of $700 million in return for a 30 percent stake in the Leviathan field. A second payment from Woodside Petroleum of $200 million is due when the needed liquified natural gas (LNG) export laws come into place. Finally, Woodside Petroleum will pay an additional $350 million when the partners approve the deal.
The wildly increased estimates of the natural gas field off the Israeli coast is based on the value of this new deal, an estimated $1.3 billion. Noble Energy will also have a 30 percent stake in Leviathan, but Woodside Petroleum will manage and operate any further LNG development at the field.
Woodside Petroleum Takes a Risk
Despite the unprecedented size of Levithan, an estimated 17 trillion cubic feet of recoverable natural gas, many big oil companies have hesitated to invest in the Israeli find. These companies, who have long standing business relationships with many oil-producing Arab countries, have been fearful of alienating those players.
However, Woodside Petroleum has been looking to expand its investments outside of Australia. The company is Australia’s largest oil and gas company, and has recently invested in energy ventures Myanmar, Cyprus, and South Korea. In taking these steps, Woodside Petroleum chief executive Peter Coleman has shown himself more willing to take on international risks than his predecessor. Don Voelte, who had been Woodside Petroleum chief executive, took the company out of such areas as Kenya, Libya, and Mauritania.
Despite the risk of alienating Arab governments and oil producers, at least one analyst at Barclays says, “Israel offers a more stable business and geopolitical environment than its neighbors.” Analysts also note that the structure of the deal reflects the potential of a variety of risks to the successful commercial development of Leviathan.
For his part, Mr.Coleman sees great value in the deal for all. He says Woodside Petroleum “has a proven track record of safe and reliable operations in Australia and being selected as Leviathan’s preferred partner in a competitive bidding process demonstrates the value of our LNG development capabilities.”
Noble Energy chief executive Charles Davidson agrees. He’s said that he believes the Australian company’s experience in LNG development would help Leviathan realize its full value. Based on the revised estimates of the natural gas field’s worth in the wake of this deal, Mr. Davidson may be correct.
About the Author: Menachem was previously a feature article writer for the Milwaukee Journal. He currently runs a small publishing business in Michigan focusing on books and magazines for the tourist industry. He is looking forward to writing for Jewocity and connecting with its readers. More about Menachem