Confident enough to count its chickens

Shares rise as Noble takes unusual step of estimating gas supply.

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In the Middle East, the US oil producer Noble Energy is best known for its large Tamar gas discovery in deep water off the coast of Israel. Yesterday in New York, its share price rose 4 per cent in early trading on the NASDAQ Stock Exchange to US$67.24 after the company said its next big gas prospect in Israeli waters might also contain billions of barrels of oil.

It is highly unusual for an oil company to announce estimates, in specific terms, of oil and gas that it has not yet found. But Noble has said the Israeli consortium it heads has a 50 per cent chance of finding a huge 16 trillion cubic feet of gas at the Leviathan prospect in the eastern Mediterranean, a 17 per cent chance of finding 3 billion barrels of oil, and an 8 per cent chance of finding another 1.2 billion barrels of oil.

So is this just bravado, or should the company's odd calculations be believed? As it turns out, Noble is an unusual company in more ways than one. For a start, it is playing technologically challenging games in arenas frequented mostly by the world's biggest international oil companies, such as ExxonMobil, Royal Dutch Shell and BP. Noble is not nearly as big as these companies, yet it is drilling difficult deep exploration prospects in the Gulf of Mexico and off Africa's west coast, not to mention off Israel.

Noble has also ventured into the US shale gas game, in which success depends on mastery of advanced drilling technology. It has recently bought oil exploration prospects in Colorado, in an area that some expect to yield North America's next big unconventional oil discoveries. So far, Noble's exploration efforts have yielded impressive results. The company has added reserves of nearly 1 billion barrels of oil equivalent through exploration in the past five years.

That means its current adventure should not be dismissed as hyperbole.