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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: DinoNavarre who wrote (157088)12/28/2011 11:18:32 AM
From: Dennis Roth4 Recommendations  Read Replies (4) of 206151
 
Noble Energy Inc (NBL)
Alert: Offshore Cyprus Discovery A Belated Christmas Gift
28 December 2011 ¦ 8 pages
citigroupgeo.com

Cyprus Yields Another Major Discovery... – Noble Energy this morning announced a
significant natural gas discovery on Block 12 offshore Cyprus (NBL 70% WI). The
company estimates the gross resource potential at 5-8 Tcf (7 Tcf gross mean, which net
equates to ~75% of its total year-end 2010 proven reserve base). Cypress appears to
be “dry” gas with similar reservoir and geological characteristics to the Leviathan
discovery offshore Israel. The gross mean reserve potential from NBL's five most
recent discoveries in the Mediterranean (see Figure 1) is now estimated at 33 Tcf.

...Which Could Be Fast-Tracked For Development... – While Noble’s two substantial
Mediterranean discoveries – Leviathan offshore Israel (NBL 40% WI) and Cyprus – are
likely to be developed as two separate LNG export projects, we believe the significance
of this most recent discovery for Cyprus will likely motivate the Cypriots to move quickly
forward with its development. But first production – Cypress needs ~200 MMcf/d
currently for internal needs – via a pipeline to an onshore site is likely no sooner than
2015. Also, an existing regasification facility onshore Cypress can be easily converted
to an LNG export terminal. Alternatively, both Leviathan and Cypress could conceivably
be developed to utilize the same LNG export facilities.

...Although Economics Are Less Attractive Than For Leviathan – One important
distinction is that the terms for Cypress is a Production Sharing Contract (PSC)
wherein there is cost recovery with a subsequent government back in (terms of the
Cypress PSC have not been disclosed) whereas in Israel the terms for Leviathan are a
tax and royalty structure. All else being equal, a tax and royalty structure ultimately
yields a superior rate of return.

Next On The Mediterranean Slate – The Noble Corp Homer Ferrington rig that drilled
Cypress will now move to drill Leviathan Deep which targets a deeper potential oil
zone. Noble currently has two other rigs drilling in the region – one at the Tamar
discovery and another drilling the smaller Tanin prospect offshore Israel. Noble has yet
to determine the drilling schedule for next year but does anticipate drilling at least one
appraisal well at Cypress in 2012. Meanwhile, Tamar remains on schedule for
commissioning late next year with first production in early 2013 which should then
slowly ramp to ~1.0 Bcf/d.

Reiterate Buy Rating – We view today’s discovery as yet another positive catalyst for
NBL with significant long-term upside potential. Thus, we reiterate our Buy rating with
a 12-month price target of $110 per share.
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