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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: DewDiligence_on_SI who wrote (143090)	12/31/2010 6:53:09 AM
From: Dennis Roth	3 Recommendations Respond to of 206151

Noble Energy Inc (NBL) Leviathan Lives Up to Its Name 29 December 2010 - 10 pages citigroupgeo.com First page: Leviathan Comes Through – After weeks of anticipation, and with NBL’s shares outperforming most of its peers along the way, Noble Energy announced today that the Leviathan (NBL 39.66% WI) prospect offshore Israel was a significant “discovery” with a gross mean reserve potential of 16 Tcf, matching the company’s pre-drill unrisked estimate. Net to Noble, this equates to nearly 100% of its total year-end proven reserve base although no reserves will be booked as proven for Leviathan until after a final development plan is sanctioned. Ultimate Value Could be $8-15 per share – We believe the most likely path to commercializing Leviathan will be an LNG export project with a start-up date of no sooner than 2018. Although several fiscal and tax issues have yet to be resolved, based on various assumptions also including project and operating costs, volume, gas price, etc., we estimate a value of $8 to $15 per share to Noble. Fiscal Issues – Current fiscal terms – 12.5% royalty and 25% federal tax, which scales down to 18% in 2016 – are likely to be revised. The Sheshinski committee should issue a recommendation very shortly which the government will then consider in instituting any new terms. A quick resolution is critical to keep Tamar (NBL 36% WI) on schedule for a late 2012 start up. Next On the Docket – Drilling will continue at Leviathan to test two deeper targets, which have a “low chance of success”, and should take 2-3 months. Depending on reservoir pressures as the well drills deeper, Noble could swap out the current rig for the more capable Pride North America which is set to arrive early next year. Otherwise, the Pride North America will immediately commence drilling the first of two Leviathan appraisal wells. Also, a new and separate exploration prospect is likely to spud perhaps as early as the second quarter of 2011. Valuation – We believe much of the value for Leviathan is already reflected in NBL’s shares given their sharp rise since this prospect spud. We are maintaining our Hold rating but raising our 12-month price target to $90 from $80 per share primarily to now attribute value to Leviathan following its success.