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01/08/2014 5:00 am EST
Our favorite speculative idea for 2014 is a company that can be viewed as an Israeli Berkshire-Hathaway, writes Vivian Lewis, investing expert and editor of Global Investing. Its lead shareholder, Yitzhak Tshuva, could be likened to an Israeli Warren Buffett.
We recommend Delek Group (DGRLY) for its potential when its huge Israeli and Cypriot offshore gasfields begin supplying markets. One field, Tamar, went live six months ago, supplying the Jewish State.
The payback depends on a political decision from Jerusalem: gasification or pipelines? distant or regional sales? These will determine the destination of the much larger, rightly-named Leviathan offshore gas field with over four trillion cubic feet.
Delek, meanwhile, is getting Tamar gas to supply its Delek Israel gas stations with compressed natural gas for seven years. Via two subs, DGRLY owns 31.25% of Tamar, while Noble Energy (NBL), the operator, owns 36%.
They just found two further gas fields southwest of Tamar with an estimated 700 million cubic feet. This will be brought to shore using an existing platform near Tamar, and help bring up the gas pressure, owned 31.25% and 45.34% by Delek.
Delek also owns 15% of a Cyprus gas field, Aphrodite, holding over three trillion cubic feet. NBL is the operator. The divided island of Cyprus may become the site of a liquefaction plant or share in a floating plant between Israel and Cyprus. This would avoid the environmental impact of bringing gas to Israel's Mediterranean coast.
An alternative is to ship Cyprus and Israeli natural gas to Western Europe. An even more audacious geo-political move would be for the Israeli government to reverse the regional pipelines bringing gas from the Egyptian Delta over the Sinai Desert to Israel.
It could supply Egypt, Jordan, and maybe Turkey, alongside other Muslim countries—perhaps a step towards peace to the region. But, even short of that pipedream, Delek holds great potential.
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