Noble Energy Inc. (NBL) said that its drilling operations at the Leviathan #2 well located offshore Israel witnessed water flowing to the sea floor from the wellbore, indicating the absence of any hydrocarbons in the produced water. This led Noble to conclude that current location and wellbore are unsuitable for drilling, bringing the drilling operations at the well to a halt.
Noble Energy said that the drilling at the Leviathan #2 well had not yet reached the depth of the targeted gas intervals discovered in the Leviathan #1 well. Noble has now decided to start an alternative assessment drilling at a nearby location where it will resume the Leviathan natural gas appraisal drilling program.
The new drilling is expected to start within a month and continue for about three months at an estimated cost of $70 million.
Noble Energy is the operator and owns about 39.66% interest in the Leviathan prospect, offshore Israel, in the Rachel and Amit licenses. Derek Drilling and Aver Oil Exploration are among other interest owners with 22.67% each and Ratio Oil Exploration with the remaining 15% interest.
Earlier in April, Noble Energy had temporarily stopped drilling at its Leviathan #1 location, offshore Israel, due to a wear on the wellbore casing. Drilling at the well continues to remain suspended for securing the required material and equipment to complete the work. The company is also performing tests for exploring the deeper potential in the well.
Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The company has core operations onshore in the U.S., primarily in the DJ Basin, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean and offshore West Africa.
Noble Energy posted impressive results in the first quarter with earnings and revenue comfortably surpassing the Zacks Consensus Estimate, supported by its strong sales revenues. The company expects its second quarter 2011 volumes to be in the 208 to 218 MBoe/d range. Our earnings per share estimates for the second quarter, fiscal 2011 and fiscal 2012 are $1.26, $4.95 and $6.64.
The prospects of Houston, Texas-based Noble Energy look good, mainly due to its well-balanced high-grade hydrocarbon portfolio, brilliant execution capability and competitive cost structure. Moreover, its disciplined investment approach, strong balance sheet and low debt-to-capital ratio give it excellent financial flexibility to fund development projects.
Looking ahead, we see the stock performing in line with the broader market and rate it as Neutral. Noble Energy currently retains a Zacks #3 Rank (short-term Hold). The company is rated at par with its closest peers Anadarko Petroleum Corporation (APC) and Chevron Corporation (CVX), based on the short term Zacks Rank.
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