The investment house reiterated its "Outperform" recommendation for Tamar partner Isramco.
9 June 11 12:33, Inbal Omer
Clal Finance Ltd. believes that Jordan may buy natural gas from Tamar. In a bullish forecast for the project, the investment house reiterated its "Outperform" recommendation for Tamar partner Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) and target price of NIS 0.47. "The Tamar project is moving forward and will likely meet its timetable," says Clal Finance analyst Yaron Zar.
Zar cautioned, however, that development of the gas field faces a problem: the project's second production rig is still under construction in Texas. The first production rig will come from the Yam Tethys gas field.
Zar also believe that problems will continue with gas deliveries from Egypt, even though supplies are apparently due to resume shortly. "The unreliability of Egyptian gas might lead Jordan to buy at least one billion cubic meters of gas a year from Tamar," he says.
Jordan currently consumes three billion cubic meters of gas a year, almost all of which it buys from Egypt.
Zar believes that worries about price controls on natural gas are exaggerated. "The price of gas in our model for Tamar, at $5.50 per million British Thermal Units, and rising by 1% a year, is conservative. Price controls, if applied, will not be an effective restriction with regard to our model's assumptions. The latest deals by Yam Tethys (over $8 per million British Thermal Units) are not representative of Tamar," he says.
Isramco owns 28.7% of Tamar. Its partners Noble Energy Inc. (NYSE: NBL) and Delek Group Ltd. (TASE: DLEKG) also own Yam Tethys.
Isramco's share price fell 1% by midday to NIS 0.411, giving a market cap of NIS 4.97 billion.
