Eni’s giant gas find triggers Israel stocks selloff
A gas discovery in the eastern Mediterranean that has the potential to transform the region’s energy balance battered Israeli stocks while Egyptian shares climbed the most in the world.
Investors are betting the find Eni SpA has dubbed as the largest ever in the Mediterranean Sea may boost Egyptian government coffers by $48 billion and bring to an end power outages that interrupted output in factories across the country. While a boon for Egypt, the discovery sent shares of Israeli energy exploration companies sliding the most on record since it upset the prospect that they’ll be able to export gas to the most populous Arab nation.
The potential Egyptian windfall tips the balance out of Israel’s favor because the field, situated offshore at a depth of about 4,757 feet, is estimated to hold 30 trillion cubic feet of gas, making it 37 percent bigger than Israel’s largest natural-gas field known as Leviathan. Getting that project up and running has been hindered by arguments over gas policy within the Israeli government.
“This is a wake-up call,” David Shrem, an energy analyst at Tel Aviv-based Sphera Funds Management Ltd., which manages about $1 billion in assets. “It is still early to say but there may be a scenario in which the Egyptian field may be developed before Leviathan.”
Noble Slides
Houston-based Noble Energy Inc., a partner in Leviathan, slumped as much as 8.6 percent in New York on Monday, extending a drop that’s erased almost a third of its market value this year. Other participants in the field plunged in Tel Aviv. Delek Group Ltd. and its exploration subsidiaries including Avner Oil Exploration LP slid the most since Dec. 23 by the close of trading in Israel, while Ratio Oil Exploration 1992 LP lost 23 percent, the steepest slide since December 2009.
The mood in Cairo was much more optimistic as EFG Hermes Holding SAE, the nation’s biggest investment bank, forecast in a research note that the field could yield $48 billion of revenue for the government. The benchmark EGX 30 Index climbed 2.8 percent, the most among 93 gauges tracked by Bloomberg.
The gas find means “downside risks to the valuation of Egyptian equities have materially subsided,” Hany Genena, the chief economist and equity strategist at Cairo-based Pharos Holding, said in an e-mailed report. Industrial companies, which have suffered from gas supply shortages, will be prompted to revive expansion plans within the next year, and “we expect foreign direct investment, whether green field or acquisitions, to recover sharply in sync,” he said.
Meitav DS Investments Ltd. recommended selling Delek Group, Avner and Ratio after the discovery, and the Israel’s benchmark TA-25 Index dropped 1.6 percent.
Source: Bloomberg
