Court Decision Sends Shares of Leviathan Partners Higher

Ratio's stock up nearly 7% and Delek Group shares rise more than 2% following Supreme Court ruling allowing 40% of domestic natural gas to be exported

Shares of the partners in the giant Leviathan natural gas field rallied yesterday, a day after the Supreme Court rejected a pair of legal challenges to a cabinet decision on natural gas exports.

Shares for Ratio, which owns 15% of Leviathan, led the gains, closing up 9.1% on turnover of NIS 86 million in Tel Aviv Stock Exchange trading. Avner Oil Exploration and Delek Drilling, which each hold 22.7% of the field, finished up 2.6% and 2.1%, respectively. Yitzhak Tshuva's Delek Group, which controls Avner and Delek Drilling, rose 2.9%.

"The court's decision reduced the risk profile of the Leviathan field," said UBS energy analyst Roni Biron. "I believe that the biggest upside can now be found with Ratio. Our model prices the Leviathan natural gas field at $6.7 billion, based on the current level of risk."

In New York Stock Exchange trading, shares of Nobel Energy - the Texas-based partner in Leviathan with a 40% stake - were up 1.1%.

The court turned down an appeal filed by environmental and social justice groups as well as Knesset members who contended the decision on exports should be made in the Knesset. The main beneficiaries are the partners in the offshore Leviathan field, which contains an estimated 19 trillion cubic feet of natural gas. Under the guidelines approved by the cabinet, they will be allowed to export three quarters of that.

An important ramification of the court ruling is that it will likely mean that an agreement signed by the energy company Woodside Petroleum last December to buy a stake in Leviathan will go through. The Australian company agreed to purchase a 30% stake in a deal that valued the entire gas field at $5 billion and lend its expertise in developing liquefied natural gas facilities and selling to markets in East Asia.

"The court's decision adds further certainty to the gas export policy settings on which Woodside based its proposed investment in the Leviathan field," a Woodside spokesman said.

Woodside's patience in waiting for regulatory obstacles to be removed made the deal more likely, said Bank Leumi energy analyst Ella Fried. However, she warned, the alternative of exporting the natural gas through a pipeline to Cyprus or Turkey still loomed as a threat to the Woodside deal.

Fried agreed that Ratio was the biggest beneficiary from the court's decision, but said she still preferred Avner and Delek Drilling because they hold stakes in the Tamar field as well, which has already begin production. "Ratio is still the riskiest asset among the stocks [in the partnership]," she said.

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