Asset Sales Boost Noble's Year in Israel
US explorer Noble Energy reported a record year in Israel, with an operating profit for 2018 of $589mn up 44% from 2017. Noble is a 25% shareholder and the operator of the offshore Tamar field, which supplies 95% of the natural gas used in Israel.
Asset sales generated one-time net revenues of $384mn so guidance for 2019 and 2020 is lower, at $130mn and $169mn respectively.
Tamar output averaged 966bn ft³/d and the price was also higher than ever, at $5.47/mn Btu, up $0.15 (2.8%) from 2017. The average price was inflated by Israel Electric Corp’s $5.7/mn Btu, while private electricity producers paid an average of $4.7/mn Btu. However the IEC is looking to reeopen the price soon (see below).
In March last year Noble sold 7.5% of its holdings in Tamar to Tamar Petroleum in cash and shares transaction. Noble received $484mn in cash and the rest in Tamar Petroleum's shares, valued at the time in $224mn. Those shares were sold in the fourth quarter for $163mn.
In total Noble reported pre-tax gains of $376mn from the sale of its 7.5% share holdings in Tamar Partnership. The company remained 25% holder in the project and its operator. As the operator it must by law hold at least a quarter of the project's shares.
Noble recorded revenues from all its operations worldwide of $4.46bn over the course of the year, which was up 9.9% on 2019. Operating profit amounted to $351mn, up from a loss of $1.18bn the year before. For the year it recorded a net loss of $66mn, an improvement from a loss of $1.19bn. The loss was in the fourth quarter in which Noble reported a net loss of $834mn, due to $1.28bn of Goodwill impairment.
During the quarter the company produced 350mn barrels of oil equivalent/d of which natural gas amounted to 876mn ft³/d, lower than the guidance for the period.
Leviathan
In 2019 Noble is expecting to complete the Leviathan development, which was three-quarters done as of December 31. Noble is 39.66% shareholder in Leviathan and the operator. The company expects to close the acquisition of the EMG pipeline by mid-2019 and to produce first gas from Leviathan by the end of the year. For 2020 it expects Leviathan to produce around 800mn ft³/day – two thirds of the project's capability – and a full year of cash flow. So far Leviathan has two anchor customers, the Jordanian National Electric Company (Nepco), and the mysterious Egyptian company Dolphinus. According to Noble, Leviathan contracts are estimated to be worth over $20bn, about five times the capital invested, for the next decade.
Tamar price freeze
IEC and the Tamar Partnership reached an agreement concerning the natural gas pricing over the next two years, they told the Tel Aviv stock exchange mid-February. According to the agreement the natural gas price will be frozen until mid 2021 when either side will be able to claim a price hike or decrease of up to 25%. The sellers are forecasting a price reduction of 12.5% to 25%.
In addition to the price freeze IEC will reduce its reserved capacity in the Tamar pipeline from 655bn ft³/d to 500bn ft³/d from the time Leviathan project will come online, which is due late this year. Tamar Partnership plans to use that free capacity to sell gas to other Israeli customers or to export it.