Ratio is the investment bank’s stock pick in the energy sector.
Leviathan partner Ratio Oil Exploration (1992) LP (TASE:RATI.L) is Barclays Capital’s top pick in Israel’s energy sector. The bank reiterates it “Overweight” recommendation but lowered its target price from NIS 0.74 to NIS 0.71, still a 69% upside on today’s opening price of NIS 0.41.After a four-day road show with Ratio CEO Yigal Landau and Geologist Josh Steinberg, Barclays analyst David Kaplan says that the company compares favorably with its European peers. “Even in our worst-case scenario where we drop the oil targets from our valuation entirely we still see 13% upside from the current share price,” he says. Under the most optimistic scenario, which include the oil prospects and the LNG facility, Barclay’s valuation is NIS 2.27 per share – 441% above the current share price
Kaplan says that Israel current offshore discoveries at Mari-B, Tamar, and Leviathan, are only the first in the Levant basin. While it is clear that there will be disappointing drills, he believes that current best estimate of 25 trillion cubic feet of natural gas “is still the tip of the iceberg,” citing a 2010 US Geological Survey report, which estimates 122 trillion cubic feet of gas and 1.6 billion barrels of oil in the Levant basin.
Kaplan says that Ratio, with $100 million in cash and no debt, is properly capitalized for its 2011-12 capital expenditure plan, which includes bringing in a marine operator for its Gal license (south of Leviathan), and the upcoming Leviathan 3 exploratory well and the resumption of the Leviathan 1 well to oil targets in deeper strata.
The Myra and Sarah leases have a best estimate of 6.5 trillion feet of natural gas with a 54% chance of geological success, but the range between the high and low estimates are quite large.
Modiin Energy owns 19.3% of Myra and Sarah, ILDC Energy and its affiliates own 48.4%, drilling operator GeoGlobal Resources Inc. (AMEX: GGR) owns 5% through its Indian unit, Israel Petroleum Company Inc. (IPC) owns 13.1%, and Blue Water Oil and Water Exploration Ltd. owns 8.8%.
Modiin Energy’s share price fell 2.1% in morning trading today to NIS 0.046, giving a market cap of NIS 902 million, but ILDC Energy’s share price rose 2.4% to NIS 1.13, giving a market cap of NIS 932 million.
Published by Globes [online], Israel business news - www.globes-online.com – on July 24, 2011
Are abundant natural resources a blessing, or a curse? This is the sort of question that economic theorists love to play with, usually concluding that, depending on other factors, they can be either or both. Israel, thus far burdened with a crippling dependency on imported oil and gas, has had astonishing success in developing its human resources—so much so that it has flourished economically even in the current global recession. Would it have done even better with adequate sources of domestic energy? Or worse? A formerly theoretical dilemma is poised to become a pressingly practical one.
Trillions of cubic feet of natural gas have been discovered in several titanic fields off Israel’s coastline. They promise both an abundance of domestic energy, as much as 200 years’ worth by some estimates, and the possibility of the country’s becoming a major energy exporter. The total value of the gas is currently worth close to a half-trillion dollars. On the macro level, and from the point of view of ensuring the country’s national security, the prospective boon is almost unimaginably beneficial. The question, as always, is what is entailed in realizing it, and how to mitigate any attendant social and political costs.
Begin with the issue of where to locate a gas terminal. Israel’s coastline is 170 miles long, the site of several cities and numerous competing uses, including ports, water-desalinization and sewage-treatment plants, military operations, and recreation. Thanks in part to ecological changes in the Nile delta (themselves the long-term effects of the Aswan high dam built in the early 1960s), the coastline is also being eroded and becoming more vulnerable to storm damage. Millions of Israelis, Jews and Arabs, vie for access to the few parks and undeveloped beaches on the seafront.
One pressing issue is strategic. Gas-receiving terminals include the infrastructure to process raw natural gas and remove contaminants, as well as storage tanks and links to distribution systems. They may also include facilities to create liquefied gas for transportation and storage by radically reducing its volume. Such facilities have the explosive potential of small nuclear weapons. In Israel’s case, any such facility will also automatically become a major target for adversaries ranging from Hamas to Iran. Already the single pipeline carrying natural gas from Egypt to Israel and Jordan has been repeatedly attacked since the fall of the Mubarak regime, and the electrical-power stations at the two coastal towns of Hadera and Ashkelon have been targeted by, respectively, Hizballah and Hamas rockets.
If the strategic implications of locating a gas terminal are significant, the domestic aspects are almost equally problematic. One plan would have placed the terminal at Dor, just south of the Hadera power station, effectively cutting through a beachfront kibbutz, nature reserve, and major archaeological site. Another proposal would expand the existing gas terminal at Ashdod, which serves a smaller offshore field. In both cases, those affected would be among the less powerful sectors of Israeli society, kibbutzniks and residents of outlying cities. (For both strategic and domestic reasons, there is no chance the terminal will be located anywhere near north Tel Aviv or its affluent suburbs.) And in both cases the sites have already been targeted by rockets.
More recently a proposal has emerged to locate a floating liquefied natural-gas terminal a few miles off the shore of Hadera, in what would amount to a giant ship that could temporarily move out of range of missile and other security threats. Australia is building a similar facility 120 miles off its western coastline, at a cost of $10 billion. In Israel, the state will of course remain responsible for its citizens’ security, but the size of the price tag inevitably raises the vexing question of who will pay for the infrastructure, and who will enjoy the proceeds.
The Israeli and American companies that have invested hundreds of millions for exploration stand to reap a windfall of billions. In January, the Israeli cabinet overwhelmingly approved taxing oil and gas profits at between 50 and 62 percent, effectively doubling the tax rate under which exploration had been launched. The new rates are in line with those in most Western countries, but the change prompted a complaint from the U.S. State Department about the deleterious retroactive effect on American investors. For their part, some Knesset members have been railing angrily about “greedy tycoons.” Prime Minister Benjamin Netanyahu has promised that the state’s share will be allocated toward education and security, but these debates can only become more heated, and more polarized, as time goes on.
No less fraught are the regional and international implications. Israel’s gas discoveries have prompted negotiations with Cyprus regarding the delineation of the two countries’ maritime borders and exclusion zones. Some entrepreneurs are talking about an undersea pipeline heading toward Europe. And, as has been well reported, there have been threats from Lebanon, which has already accused Israel of stealing “its” offshore natural gas.
Just south of the national park at the imposing ruins of Roman and Byzantine Caesarea, including the remains of the ancient aqueducts that supplied much-needed fresh water, and of the modern town of Caesarea that is home to some of Israel’s elite citizens, lies the Hadera power station. Its smokestacks dominate the horizon; a jetty protrudes offshore to carry coal from cargo ships.
The view from Caesarea beach thus already offers a juxtaposition of old—very old—with new infrastructure, as well as of the conflicts and divides that characterize Israeli society internally and its relations with its neighbors without. One can only hope that, with agility and political wisdom, the Jewish state will successfully navigate its course between the blessing and the curse of immense amounts of fuel, and the forms of power that come with it.
Alex Joffe is a research scholar with the Institute for Jewish and Community Research.
JERUSALEM, Israel — Unrest in the Middle East is threatening Israel’s energy supply.
But recent natural gas discoveries and extracting oil from shale could make the country energy independent just in the nick of time.
Some are calling it a potential energy revolution.
Off the coast of Israel in the waters of the Mediterranean Sea, explorers have found what is being called the largest offshore gas reserve in the world and the biggest find in a decade.
The discovery is a major development because Israel has long been the one Middle East country without its own oil and gas resources.
“The joke was ‘Why did it take Moses 40 years to bring the people of Israel from Egypt to Israel? Because he looked for the only place in the Middle East that lacked oil and gas,’” said Gideon Tadmor, CEO of Delek Energy.
“So that was the joke. But we proved the joke to be wrong, and actually we know that Moses brought us to the right place,” he added.
Delek Energy and its American partner, Noble, are behind the discoveries that will start producing natural gas for customers in 2015.
Energy expert and former CIA director James Woolsey says the gas fields make Israel energy independent.
“They’re extraordinarily important and strategically very advantageous I think for Israel,” Woolsey told CBN News.
In addition to natural gas, it appears the Jewish state is also rich in oil shale– a fine-grained rock which can be used to produce oil through a special process.
Harold Vinegar, chief scientist with Israel Energy Initiatives, says the amount of oil shale buried here might equal the oil reserves of Saudi Arabia.
“We think it’s conservatively estimated at about 250 billion barrels of oil contained in the Israeli oil shale – probably the second or third largest deposit in the whole world,” Vinegar said. “And it has a tremendous potential to make an oil industry here.”
Experts say there’s enough oil shale to produce at least 50,000 barrels of oil a day – enough to meet Israel’s military and civil aviation needs for 25 years.
Israel Energy Initiatives is now performing quality tests.
Vinegar, who was also a chief scientist for Shell, says the samples indicate the oil quality to be very high before it’s even refined.
As the world population increases, so will the demand for crude, and that will push up the price.
In response, countries like Israel that import most of their energy will have to develop unconventional resources like oil shale.
“There’s nothing scarier than running out of energy,” Vinegar said. “I mean, wars have been fought entirely for oil. And so this is something we feel we’re doing for Israel, which is to develop the oil shale here.”
If his group’s plans work out, the land of Israel will hold even more promise for the future.
Holders of the Sara and Myra exploration licenses off Israel’s Mediterranean coast said today that a seismic survey showed they may hold 6.5 trillion cubic feet of natural gas.
“This is an excellent report for us and for the energy sector,” Ohad Marani, the chief executive officer of Israel Land Development Co. Energy Ltd., said at a conference in Tel Aviv. The average probability associated with the results is 54 percent, he said.
The results for Sara and Myra follow other gas finds off Israel since 2009, including the Tamar and Leviathan discoveries that together hold an estimated 25 trillion cubic feet. The finds are sufficient to meet Israel’s domestic needs eventually and enable it to export gas, industry executives and government officials have said.
“Its always exciting to find natural resources,” said David Kaplan, a Tel Aviv-based energy analyst at Barclays Plc. “The government has shown concern about having an effective monopoly on natural gas and none of the partners in Sara and Myra are partners in Tamar.”
Tamar partnership companies fell in Tel Aviv trading. Isramco Negev 2 LP dropped 0.7 percent to 0.42 shekels at 12:41 p.m. Avner Oil Exploration LLP (AVNRL) declined 2 percent to 2.03 shekels. Delek Drilling LP lost 1.5 percent to 11.31 shekels.
Kaplan noted that Tamar is already being developed and may produce gas by 2013, while Sara and Myra are still targeted prospects rather than discoveries. “In the best case scenario, where everything goes perfectly, the first product may be two to four years from now,” he said.
Israel Land Energy fell 8 percent in Tel Aviv today after rising 13 percent yesterday on press reports of the estimates. Modiin Energy Ltd., another partner in the licenses, retreated 8.1 percent after gaining 8.8 percent in the previous session.
To contact the editor responsible for this story: Claudia Maedler at firstname.lastname@example.org
In his July 1 letter to shareholders, Zion Oil & Gas CEO Richard Rinberg wrote that Zion was planning to test the Ma’anit-Joseph #3 well in spite of disappointing wire-log reports. Based on the wire log data, Rinberg reported, “there is little chance that the Ma’anit-Joseph #3 well contains hydrocarbons in commercial quantities.”
The reason Zion decided to move forward with physically testing the well is that during drilling they experienced “significant natural gas shows.” The gas, according to Rinberg, pushed past the heavy drilling mud, indicating that it,”appears to be under relatively high pressure at depth.” Testing the well will determine exactly where the natural gas is coming from and whether there’s enough of it to make the Ma-anit-Joseph #3 a commercial well. Testing the well will also give Zion greater insight into the geology of their surrounding license area and may help them determine where to drill next.
When I first read Rinberg’s letter I was tempted to be a bit dis-heartened by the phrase describing the wire-log interpretation, “there is little chance” of a commercial discovery. But then I remembered another letter, one written to the Hebrew people about 2,000 years ago; it listed the heroes of old and the faith that allowed them to persevere in spite of the current technology telling them. “there is little chance.”
- There was ‘little chance’ that a worldwide flood would destroy every living thing that wasn’t packed in Noah’s boat.
- There was ‘little chance’ that Abraham, at 100 years old, and Sarah, at 90, would have a child.
- There was ‘little chance’ that Isaac’s life would be spared by an angel and a ram caught by his horns in a thicket.
- There was ‘little chance’ that a slave child with a death warrant on his head would be spared, raised in Pharaoh’s household, and exiled to the desert 40 years would lead his people out of slavery and into a Promised Land.
- There was ‘little chance’ that a rag-tag group of pilgrims marching around Jericho could make the city’s walls fall down.
- There was little chance that Gideon’s 300 men could rout an army of hundreds of thousand Midianites.
- There was little chance a skinny 17 year-old kid could kill a fully armored Philistine warrior giant with a sling shot.
I could go on … Hebrew history is full of heroes who were given ‘little chance’. What was the one thing they had in common that far outweighed ‘little chance’ of success? Faith.
“Now faith is being sure of what we hope for and certain of what we do not see. This is what the ancients were commended for.” (Hebrews 11:1)
Faith doesn’t come from wire-log data; it comes from the One Who does what He promises. I’m looking forward to test results.
CBN (Christian Broadcasting Network) reports on Israel’s energy revolution and recent discoveries of natural gas (the largest worldwide in over a decade) and oil shale (the second or third largest deposits in the world).
On Thursday, June 23 Zion Oil & Gas, Inc. (NASDAQ: ZN) filed a prospectus with the SEC for a $31.25 million rights offering to current stockholders. The rights offering consists of 6,250,000 non-transferable subscription rights @ $5 per Unit. Each subscription right Unit includes (1) share of Zion common stock and (2) warrants to buy additional shares of common stock @ $3.50 per share. Zion stockholders will receive (1) subscription right Unit for every (4) shares of Zion common stock they own as of June 15.
What this offering means is that if a Zion stockholder owned 1,000 shares, for example, of common stock on June 15, Zion will send, at no charge, 250 ‘subscription rights Units’. Each Unit, if exercised @ $5, entitles the stockholder to (1) share of Zion common stock and (2) warrants to buy additional shares @ $3.50 within one year of the offering’s close. Exercising the Unit offering including the Warrants would cost the stockholder a total of $12 per (3) shares of Zion common stock. As of this writing Zion common stock is trading on NASDAQ (ZN) @ $5.56 – buying (3) shares of Zion common stock at the current trading price would cost $16.68.
This offering is currently scheduled to close on July 25, 2011. Even though the offering limits stockholders to (1) subscription right per (4) shares of common stock owned, stockholder may oversubscribe to purchase additional that remain unsubscribed at the close of the offering, subject to availability and allocation.
If fully subscribed, Zion will raise $31,250,000 from the sale of Units, and if the warrants are fully exercised within a year of the offering’s close, an additional $43,750,000. According to the Prospectus Zion Oil & Gas will use proceeds from the offering “for (i) furthering our oil and gas exploration program by carrying out geological and geophysical studies on our exploration areas, (ii) complete logging, interpretation and any production testing that may be deemed needed with respect to the Ma’anit-Joseph #3 well (iii) drilling a well on our Jordan Valley License and (iv) general corporate purposes.
Zion’s Prospectus describes the company’s current and applied for exploration territory in Israel:
“We currently hold two petroleum exploration licenses, which we have named the Joseph License and the Jordan Valley License, covering approximately 139,000 acres of land onshore Northern Israel. A third petroleum exploration license, the Asher-Menashe License covering approximately 79,000 acres of land adjacent to the Joseph License, expired on June 9, 2011, its scheduled expiry date. We have continuously held the Asher-Menashe since June 2007 and we have drilled one exploratory well in this license area. Prior to the expiry of the Asher-Menashe License, we submitted to Israeli Petroleum Commissioner an application to extend the license. We do not believe that the Israeli Petroleum Commissioner will deny our application for the extension while we have a current well on the site; however, no assurance can be provided that the requested extension will be granted.
“In February 2011, we submitted to the Commissioner applications for two exploration licenses and an application for a preliminary exploration permit. One of the license applications and the application for the preliminary exploration permit cover substantially all of the area covered by our previous Issachar-Zebulun Permit, which expired on February 23, 2011. We named one license application (with respect to part of the previous Issachar-Zebulun Permit) the Jordan Valley License Application and the preliminary exploration permit (applied for with respect to substantially the balance of such area) the Zebulun Permit Application. We named the other license application the Dead Sea License Application as it relates to areas within the vicinity of the Dead Sea.”
Fox News personality, former Presidential candidate and former governor of Arkansas, Mike Huckabee was presented with a copy of Steve Spillman’s ”Breaking the Treasure Code: The Hunt for Israel’s Oil”. Oil in Israel and Zion Oil & Gas fan Bob Bradshaw from The Woodlands, Texas. Bob Was with Mr Huckabee at a recent Houston fund raising dinner.
DALLAS and CAESAREA, Israel, June 14, 2011 (GLOBE NEWSWIRE) — Zion Oil & Gas, Inc. (Nasdaq:ZN) announced today that on June 13, 2011, the Company submitted an application to the Israeli Petroleum Commissioner’s Office, requesting the grant of a new petroleum exploration permit area adjacent to Zion’s Joseph License area. The new permit application has been named by Zion, the “Asher-Joseph Permit Application”.
The Asher-Joseph Permit Application area covers approximately 80,000 acres of land and is to the west and south of Zion’s Joseph License area. It is onshore Israel and traverses a section of land, adjacent to the coastline, between Haifa and Tel Aviv. The grant of a permit would allow us to conduct, on an exclusive basis through a specified period, preliminary investigations to ascertain the prospects for discovering petroleum in the area covered by the permit. Unlike a license area, where test drilling may take place, no test drilling is allowed on a permit area.
Zion’s Chief Executive Officer, Richard Rinberg, said today, “We have three applications for new exploration areas pending before the Israeli Petroleum Commissioner’s Office: the Asher-Joseph Permit, the Zebulun Permit and the Dead Sea License.
“We continue to implement our exploration and drilling program and build on our progress to date. If granted the new exploration areas, we intend to acquire additional seismic and other geological and geophysical data, as we work towards refining potential drilling prospects.
“Currently, drilling operations at our Ma’anit-Joseph #3 well continue. We have reached our target depth of approximately 19,357 feet (5,900 meters), in the Permian geologic layer in Northern Israel, and are now preparing for open-hole wireline logging operations, planned to commence this week. Depending on the outcome of our wireline logging and subsequent interpretation, we may determine to drill this well deeper.”
Zion’s common stock trades on the NASDAQ Global Market under the symbol “ZN“.
Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located onshore between Haifa and Tel Aviv. It currently holds two petroleum exploration licenses, the Joseph License (on approximately 83,000 acres), between Netanya, in the south, and Haifa, in the north and the Jordan Valley License (on approximately 56,000 acres), just south of the Sea of Galilee. The Asher-Menashe License (on approximately 79,000 acres), which Zion has held continuously since June 2007, expired on June 9, 2011 (its scheduled expiration date); however, prior to that date, Zion submitted an extension application to Israel’s Petroleum Commissioner.