Israel's Harel May Purchase Share of Tamar Gas Reserve From Noble Energy

Tamar was discovered in the eastern Mediterranean in 2009, and is now Israel's primary gas source.

Tamar
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Harel Insurance Investments & Finance confirmed Sunday it is in talks to buy up to 4% of the Tamar natural-gas field from Noble Energy as the Texas-based company moves to reduce its stake in the field to meet the terms of the gas framework agreement.

The company, which is in talks to buy the stake together with Israel Infrastructure Fund, didn’t put a value on the sale, but sources told TheMarker over the weekend that it would be in the range of $350 million to $400 million.

Harel said the negotiations with Noble are for a 3% stake in the project with an option to buy another one percent.

Analysts said the negotiations — coming just days after Noble said it won authorization to begin an initial investment of $120 million in Leviathan — confirmed that the U.S. company was determined to develop the much bigger Leviathan reservoir.

“We believe the impending deal between Nobel and Harel is very good news for Leviathan, because Noble is working to raise its cash reserves for one clear purpose: To expand the equity base is needs to finance Leviathan’s development,” said Yehonatan Shohat, energy analyst at Leader Capital Markets.

In addition, Israel and Turkey are reportedly close to a diplomatic rapprochement that could pave the way for Israeli gas exports to Turkey, making the Leviathan field economically viable.

Shares of Ratio, which has a 15% stake in Leviathan, rose Sunday in Tel Aviv Stock Exchange trading, ending 1.7% higher at 30 agorot (7 cents) despite a massive sell-off in the wake of last week’s Brexit vote. Other energy shares were down sharply.

With reserves of 10 trillion cubic feet, Tamar will be the primary source of Israeli natural gas until Leviathan goes into production in 2019-20. Under the terms of the framework the energy cartel reached with the government, Noble must reduce its stake in Tamar to 25% from 36% within six years.

Noble has been in talks with several Israeli institutional investors, including Clal Insurance, Migdal and Menora, to sell its 11% Tamar stake for a combined price of about $1 billion. Israel’s Delek Group, the other partner in Tamar, must sell its entire 31.3% stake, so that all told about 42% of Tamar will be up for sale in the next few years, for a price that could reach as much as $5 billion.

Noble needs the cash as the worldwide plunge in energy prices has cut deeply into profits and the market valuation of the company. Getting Leviathan into production would cost as much as $4 billion for only the first stage of development.

“In addition to selling part of Tamar, we believe that down the road Noble will try to sell additional stakes in Leviathan, based on company policy and the need to raise cash, but it is too early to say when this will happen or at what valuation,” said Liran Lublin, energy analyst at IBI Israel Brokerage & Investments.

Sources said Noble could be looking to sell between 5% and 15% of its 39.6% holding in Leviathan, which could fetch between $3 billion and $5 billion.