Noble Energy To Divest Tamar Interest In Cash & Share Deal

Noble Energy, Inc. (NYSE:NBL) signed a definite agreement to divest 7.5% interest in the Tamar field, offshore Israel, to Tamar Petroleum Ltd. The companyanticipates receiving $560 million in the form of cash proceeds and 38.5 million shares of Tamar Petroleum. Based on the closing price of Tamar Petroleum, as of Jan 29, 2018, the total value of deal comes to $800 million. It expects the transaction to conclude by the end of first-quarter 2018, subject to Tamar Petroleum's terms and conditions.

Notably, Noble Energy is currently divesting its Tamar Interest to support its commitment in accordance with the government of Israel's Natural Gas Regulatory Framework.

The company intends to use the cash proceeds from the transaction to aid in its investment for the Leviathan development. Further, it anticipates capital gains tax of 23% after the completion of the transaction. In 2016, Noble Energy had divested 3.5% in the Tamar field. The sum total of proceeds from both transactions has resulted in the generation of $1.25 billion, of which $1 billion is in cash.

Per management, the operations in Tamar supported by Leviathan development is expected to aid the company in generating competitive margins that will ensure a stable and long-term cash flow profile, in the future. Going ahead, Noble Energy intends to divest the shares held in Tamar Petroleum.

Utilization of Proceeds

Noble Energy’s current debt to capital ratio is pegged at 42.96%, higher than the industry average of 36.75%. As of Sep 30, 2017, the company's long-term debt was $7,487 million higher than 2016 end level of $7,011 million.. We expect the ongoing divestitures to aid the company in strengthening its balance sheet position and development of its ongoing capital projects.

Noble Energy has been divesting non-core assets in order to increase focus on core assets. In November 2017, the company signed a definite agreement to divest nearly 30,200 net acres of company’s non-core DJ Basin portion to SRC Energy Inc, for a sum of $608 million. The sales proceeds will be used toward developing core assets and also strengthen balance sheet. Such asset dropdowns and reduction of debts surely bodes well for the company’s growth.

Price Movement

Shares of Noble Energy have outperformed the industry last month. The company’s shares have gained 4.7%, compared with the industry’s rally of 1.6%.

Zacks Rank & Top Picks

Noble Energy currently carries a Zacks Rank #3 (Hold). Investors can consider better-ranked stocks from the same industry like Bonanza Creek Energy, Inc. (NYSE:BCEI) , Continental Resources, Inc. (NYSE:CLR) and Penn Virginia Corporation (NASDAQ:PVAC) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bonanza Creek reported an average positive earnings surprise of 188.7% in the last four quarters. Its 2018 Zacks Consensus Estimate for earnings moved up 155.3% to $1.94 in the last 90 days.

Continental Resources reported an average positive earnings surprise of 69.5% in the last four quarters. Its 2018 Zacks Consensus Estimate for earnings moved up 121.5% to $1.44.

Penn Virginia reported an average positive earnings surprise of 26.6% in the last four quarters. Its 2018 Zacks Consensus Estimate for earnings moved up 10% to $7.40.

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