Karim Rahemtulla’s Cyprus Gas Tease

Sniffing out the Cypriot Gas teaser from the new Oil & Energy Confidential newsletter

OK, OK — the most asked-about teaser ad this week has been Karim Rahemtulla’s pitch about Cypriot natural gas for his newly launched newsletter … so although the clues are thin and the presentation was tiresome to listen to, your friendly neighborhood Gumshoe is digging in.

But it’s only because I love you.

The new letter being launched here is Oil & Energy Confidential, and it is pitched by Rahemtulla as his way to play his insider connections in the Middle East, including friends and relatives. He has apparently been a world traveler, including “boots on the ground” trips to Egypt as Mubarak was falling and a boat ride in the Strait of Hormuz, one of the potential energy choke points that everyone worries about in the event of a shooting war or more severe standoff with Iran.

I don’t know if he’s actually the “only known Western civilian” to have ventured into the Strait of Hormuz, but that strains credulity a little bit given the massive amount of commercial traffic in the area. Apparently his visit to the Strait was enough to convince him that Iran would not try to shut down traffic there, though plenty of folks feel differently and it’s been tried before — they don’t have to close the waterway (which is mostly on the Oman side) to stop oil tankers, they just have to mine it or threaten to attack commercial traffic, which would certainly inspire a vigorous NATO response and escalate tensions and drive oil prices up, particularly in Asia. Whether they’ll try this again is a question I can’t answer, the latest real chatter and fear about this was about a year ago … but Karim says no.

What I can do is look into his first specific teaser stock pick for this new newsletter.

I won’t quote much, because it’s not really in a print presentation or transcript, I just had to get the sense from the video ad. Basically, what Rahemtulla is saying is that there is a substantial natural gas resource in Cyprus, one that they’ve just begun to discover over the last couple years, and that this gas resource is going to be a lifeline for the Cypriots.

That’s because Cyprus needs substantial rescue funds, as we’ve all seen, from the European Union, and they need to build some sort of real economy that’s based on more than just being a tax haven for wealthy Russians … and, coincidentally, as they’ve started to discover these big offshore gas fields, they also find themselves with their closest neighbors in the EU being desperately in need of natural gas, partly because Europe’s gas is overwhelmingly supplied by Russia, often at a high cost in both political and financial terms.

So Rahemtulla believes they’re going to ramp up the typical long discovery/appraisal/evaluation/development/production timeline in the Cyprus gas fields, start pushing for more and faster drilling, and make his recommendation rich in the process.

We get no clues about the stock he’s teasing other than that he has a “secondary strategy” for profiting from it, which almost certainly means it has options trading available … and that it’s a NYSE listed stock and he’s plunking a $300 price target on the shares.

So who’s our bogey? Given those clues, this almost certainly has to be Noble Energy (NBL — Not NE, which is the offshore drilling contractor Noble Corp.). Noble has been very active in the Eastern Mediterranean for years, being part operator of the huge Leviathan natural gas discoveries offshore Israel that are close to the Cyprus exploration blocks, and they are indeed drilling more this year in Cyprus to appraise the gas discovery they made there in 2011. The Cypriot government has asked Noble to step up drilling so they can prove up their national reserves more quickly, but given the long scheduling timeframe of most deepwater drillships and rigs I don’t imagine they’ll be that much more aggressive than they’re already trying to be — the Israeli fields are a significantly higher priority right now because they’re closer to real production and (so far, at least) appear to be considerably larger.

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And yes, Noble does have options trading if you’re interested — and a share price of about $110, so the $300 target is perhaps within the realm of possibility someday. I don’t know what kind of options strategy Rahemtulla might be using, but the most actively traded and widely-held options contracts are the January 2014 call options with strikes of $120, $130 and $140, so odds are pretty good his strategy has something to do with those contracts (I’d guess that he’s probably recommending some upside leverage to his anticipated spike in the price by buying the $130 calls, which trade around $2.50-$3 or so, but that’s just a guess).

They’re also a pretty well diversified “small major” in the oil and gas space, with significant production or exploration assets in the US (including the Niobrara and the deepwater Gulf of Mexico), West Africa, Nicaragua, the Falkland Islands and elsewhere. The market cap is about $20 billion, and they trade at a forward PE of about 13 with a 1% dividend yield — so they’re substantially more expensive than the real mega-majors, many of which trade with PE ratios around 8 and much more substantial dividends, but they do have real exploration upside and they’re small enough to add significantly to their reserves and future production with each new or expanded discovery.

Noble has been teased before a few times, mostly because of the Israeli Leviathan discovery and the other gas fields in the Levant Basin area — which itself might end up benefitting Cyprus if, as the Cypriots hope, some of that gas production can be exported through pipelines to Cyprus on its way to Europe. Major production from these fields is several years off, though the Tamar field offshore Israel (which is roughly similar in size to the preliminary estimates from the Cypriot Aphrodite field) is producing gas now, and production from the fields off Cyprus is probably close to a decade away unless it can be speeded up quite dramatically — there isn’t much infrastructure available, so they’ll also have to get some major investment to build out pipelines and processing plants once the discoveries are more fully fleshed out.

The importance of natural gas to Cyprus’ future is not a new thought — that’s been a big part of the background of all of the financial rescue chatter, and before that has been a point of contention with Turkey, which is pushing for their part of the disputed country to also benefit from gas discoveries. There’s a pretty good article here that goes over the geopolitical and development wrangling that’s still under way. So there’s certainly room for lots of different developments — including more discoveries, political disputes, infrastructure partnerships, etc. — that could impact the value of Noble’s exploration blocks (and others — Total and ENI also hold some blocks that are less explored).

So does it sound like an exciting opportunity to you? Sniff around and let us know what you think with a comment below. Thanks!


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vivian lewis
May 4, 2013 1:41 pm

for the record I have never challenged Travis to figure out one of my stock ideas. If he stumbles close enough I tell people who read him; if that is tooting my horn, sorry. But somebody has to toot my horn besides newsletter tracker Mark Hulbert if we are to gain subscribers.
I run a very small-cap newsletter which comes out daily and have a staff of writers. we make money for our subscribers. we do not market to the masses as this is very expensive and would require that we boost our sub price.
we let our performance speak for itself as we cannot afford the teaser marketing junk. try it and see.
as for advertising on stock gumshoe I am not sure this is altogether a prestigeous site for serious ads, to judge what I see alongside the gumshoe’s investigations. sorry. I would like to work with Travis

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whatch
Member
whatch
May 4, 2013 10:02 pm
Reply to  vivian lewis

Hello Vivian,
Perhaps I owe you an apology. I could swear I read a few months back where you said (loosely quoted) “I wonder when Travis and the Mighty Think-o-later is going to take on the great Vivian Lewis”. If I am wrong or confused please accept my apology for that error. As I said in an earlier reply. I don’t mind being corrected when I am wrong. And I certainly am not above offering an apology when warranted. Your point is well received and since I elected not to subscribe I am not an authority on the content of your publication or expertise and you have every right to dress me down. In hind sight. I should have just kept my opinion and comments to myself. Again, I ask that you please accept my apology if I have misspoken.

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whatch
Member
whatch
May 4, 2013 10:55 pm
Reply to  vivian lewis

Hello again Vivian,
I couldn’t help myself after reading your reply to me. I have been going back through past issues and finally found what I was referring to. I definitely owe you a sincere apology and as I spouted off here I wanted to come back here and do it. While I pull my foot out of my mouth please consider accepting my most heartfelt apology. It was a comment from WHO NOZE about deciphering one of your stock picks that I referred to. OK,OK. I’m an idiot sometimes. Just another reason I’m glad that my wife has the patience of a saint. But I truly do hope that you will forgive my arrogance and accept my apology.

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baygreen
Member
May 4, 2013 3:25 pm

The green really works in China the king that goes in there pockets and we are paying them to fuel Gore Gulfstream not to mention his limo for his wacked out movies that are made with cuts and clips from disney world. Scientists make there own thermostat and none of them are the same. It took 11 cuts to get the show bear on the right piece of ice for that prom and they got busted by u-tube but the clip was sold to keep it off the green machine. Obama likes one thing better than the tree huggers and that is Warrens Oil Train which is self insured when there is the first 150 tanker full of oil used to fertilize the subsidized corn for the bio Navy contracts. SYNM and GEVO HAVE GREAT BILLIONAIRE partners and clients but they don’t get to refine it Mansfield Billion $ refinery which is private hides the monkey well for the EPA. Here is the big teaser that Travis and the Thinkolater can look up. MAJOR DRILLING CONTRACTOR AND YES MAJOR IS CAPITAL LETTERS HAS 2,000,000 MILLION CALL CONTRACTS OUT FOR HIS 2015 LEAPS AND HIS DIRECTORS GOT ON THE TRAIN TO. Oh need to tease a little more lets see he owns almost 30% of the company which is the largest holder and they like in play in the water. I got the proof and will send you a legit copy . Just for fun Travis I would think you have enough now and nobody has any news letters teasing it yet.

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Bob
Member
Bob
May 6, 2013 12:53 pm
Reply to  baygreen

More partisan bs from the loony rightwing without a single fact to back up their
arguments.

Barry Shaw
Member
May 5, 2013 1:37 am

As written here there are the Leviathan and Tamar reservoirs of natural gas offshore from Israel. The partners involved are and American and Israeli mix – Houston-based Noble Energy holds 39.66% of the Leviathan field, Isralei-based Delek Drilling and Avner Oil Exploration each hold 22.67%, and Israeli-based Ratio holds 15%. However, the partners have a conditional agreement to sell a 30% share of the field to Australian firm Woodside Petroleum. The companies have expressed a desire to export as much as they can but the political discussions within the Israeli government is to hold back as much as possible for domestic consumption. The Leviathan expectations was recently raised by 5% to 18.9 trillion cubic feet (535 b.cu.m.). The neighbouring Tamar field is bigger, containing 250 b.cu.m. It is likely that Israel will use the Tamar field for domestic comsumption thereby releasing Leviathan for export purposes. A third field will be a joint venture between Cyprus and israel. The Cypriot President is in Israel right now meeting Israel’s Prime Minister and other government officials. Cyprus is pinning its economic recover on the natural gas reservoir. One thing is for sure, the development and exploitation of these natural gas resources will be infinitely more rapid than similar resources in America. The economic and political benefits are so essential to Israel and Cyprus that normal bureaucratic sluggishness has been overcome in an effort to become energy independent and to kickstart local economies.

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olwreckdiver
Member
olwreckdiver
May 5, 2013 3:36 am

As for CNG, most of the major trucking companies are converting, and Washington State Ferries figures they’ll save a huge amount by converting 2 ferries from diesel to CNG.

whatch
Member
whatch
May 9, 2013 10:54 pm
Reply to  olwreckdiver

I read an article that said that many school bus systems and large city refuse trucks (Baltimore if I remember correctly was one mentioned) are also converting and estimates are that millions in savings will be realized nation wide. Not to mention the reduction in emissions.

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Rod
Guest
Rod
May 8, 2013 10:10 am

I was trying to find what stock he was talking about before I found this article on Stock Gumshoe and I had found an article at CNN Money. They seem to think Noble Energy (NBL) is set up to make a fortune on it too. http://money.cnn.com/2013/03/21/news/economy/cyprus-natural-gas/index.html

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whatch
Member
whatch
May 10, 2013 1:32 pm

Uh oh boys and girls. Hold on. It’s virtually keeping pace with the market so we need to put on the brakes before this thing gets out of hand. Yep, keeping pace with the market at about 5% is a sure fire explosion in price. Makes me want to jump right in with all of my eggs in that basket. NOT!

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