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Noble Energy (NBL) Signs $430M Natural Gas Deal with Egypt

Zacks Equity Research

Per a media release, Noble Energy Inc. NBL has signed a $430-million agreement with Egypt to supply natural gas through the East Mediterranean Gas Company's (EMG) pipeline. The EMG Pipeline is a 90-kilometer pipeline, located primarily offshore, that serves as a connection between Israeli and Egyptian pipeline networks.

Earlier this month, Noble Energy along with its partners closed the acquisition of a 39% equity interest in the Eastern Mediterranean Gas Company S.A.E. (“EMG”), which owns the EMG Pipeline. This pipeline will allow Noble Energy to fulfill its export obligation from Leviathan and Tamar into Egypt, commencing January 2020 and gradually increasing to 650 MMcf/d, gross, by mid-2022.

Eastern Mediterranean Assets

Noble Energy’s Tamar and Leviathan (96% complete) are expected to support the rising demand for natural gas demand in the region. The Leviathan project, which is expected to start commercial operation by the end of this year, will further strengthen its position in this region.

The export contract to Egypt was amended recently, increasing the firm’s long-term export volumes by more than 160% to 3 trillion cubic feet (Tcf). Leviathan and Tamar fields have contracts to supply 2.1 Tcf and 0.9 Tcf, respectively, of natural gas to Egypt.

The EMG Pipeline will act an important link between Noble Energy and its customers in Egypt.  In addition, demand from Israel and Jordan is expected to drive regional sales from Tamar and Leviathan to the range of 1.6-1.8 billion cubic feet per day (Bcf/d) in 2020.

U.S. Natural Gas Production

The U.S Energy Information Administration forecasts that U.S. natural gas production capacity will touch 91.4 Bcf/d in 2019, indicating a 9.6% improvement from 2018 levels. Moreover, 2020 production is expected to improve nearly 2% year over year to 93.2 Bcf/d.

Noble Energy has a strong presence in the United States and serves customers through high-quality U.S. onshore assets in DJ Basin, Delaware Basin and Eagle Ford Basin, which contributes nearly 76% to the company’s sales volumes. In the fourth quarter, sales volumes from U.S. onshore assets are likely to be in the range of 276-288 thousand barrels of oil equivalent per day (MBoe/d), with total sales volumes expected within 364-376 MBoe/d.

Shale revolution in the United States is the primary reason behind the massive increase in natural gas production. Companies like Exxon Mobil XOM, ConocoPhillips COP and Devon Energy DVN, among others, contributed considerably toward overall natural gas production in the United States.

Price Performance and Zacks Rank

Noble Energy’s shares have outperformed its industry year to date.

Noble Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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