Noble Energy upgraded to "Outperform"

Noble upgraded to "Outperform" on increased oil focus, future accelerated production growth

• On 1:40 pm EDT, Monday October 26, 2009

NEW YORK (AP) -- Shares of oil and gas producer Noble Energy Inc. have been dragged down too far by the plunging value of its natural gas assets as natural gas prices have fallen, said an analyst on Monday as he upgraded the stock.

Noble Energy's shares are positioned to rise as the company sheds natural gas properties and shifts its investments to crude oil, which has rebounded significantly in price over the course of the year, said RBC Capital Markets analyst Leo Mariani. The move will boost shares of the company, due to better economics, given the recent rebound in oil prices, which outshine lagging natural gas prices.

Crude oil prices have more than doubled since February lows to top $80 per barrel in recent trading. Natural gas prices today are flat compared with February levels.

Shares of Noble rose $1.17 to $70.66, in afternoon trading and traded as high at $73.60 earlier in the session.

Mariani said in a research note released before the start of regular trading that Noble's share price is too-severe a discount for a company that is shifting so much of its operations to oil. He upgraded his rating on Noble's shares to "Outperform" from "Sector Perform" and raised his price target to $90 from $85.

Mariani expects that 41 percent of Noble's 2009 production will be based on crude, but should increase to over 60 percent by 2013.

"Noble's best economics are in deepwater Gulf of Mexico, West Africa and Israel regions, and we expect it to devote most of its capital to these crude-weighted regions."

Noble's exploration in the deepwater Gulf of Mexico is an especially strong near-term catalyst as two deepwater prospects have over 300 million barrels of oil of gross resource potential, which would represent about 12 percent reserve upside to Noble if successful, Mariani said.

Looking ahead, Mariani expects production growth should accelerate over the next four years as the company's major recent discoveries come online.

Buzz up!