Modiin, Israel Land Drop on ‘Dry Hole’ Gas Well Finding

Israel Land Development Co. Energy Ltd. (IE) plunged the most on record and Modiin-LP (MDINL) slumped after the natural-gas exploration companies decided to abandon the Sara 1/348 well because data showed the site is a “dry hole.”

Israel Land Energy, which owns a stake in the drilling rights to the offshore well, tumbled 61 percent to 0.081 shekel at the close in Tel Aviv in the biggest drop since the shares started trading in Israel in 2010. Trading volume was almost six times the stock’s three-month average. Modiin LP, also a partner, fell 44 percent to 0.089 shekel, the lowest price since June 1999, with volume quadruple the three-month average.

The companies found high-quality sands at the drill, but with water at the point of drilling, and no commercial quantities of hydrocarbons, they said in a stock-exchange filing yesterday. In September, Tel Aviv-based Israel Land Energy and Modiin said no significant signs of petroleum were found at their joint Myra 1 well.

“Finding a dry hole is entirely normal, and the industry will continue drilling and searching for hydrocarbons at current or deeper levels,” David Kaplan, an analyst at Barclays Plc (BARC) in Tel Aviv, said today by phone. “It is hard to measure what the domestic market was counting on from Sara and Myra for local use,” which may have to be supplied by a larger field, dubbed Leviathan.

2013 Production

Natural-gas discoveries off Israel’s Mediterranean coast over the past three years have given the country an opportunity to become an exporter of the fuel. The Tamar and Dalit fields are scheduled to start production next year and are big enough to supply Israel with gas for two decades. The Leviathan site is estimated to hold as much as 480 billion cubic meters of natural gas, more than the U.K.’s remaining reserves.

Israel Land Energy’s 30-day historical volatility, a measure of stock swings, jumped to 380.2 today from 260.5 on Oct. 18, exceeding the 30-day historic volatility of 15.4 for the TA-25 index today. A higher reading means the price of an asset can move dramatically in a short period, increasing the potential for unexpected losses. Tel Aviv-based Modiin’s 30-day historical volatility rose to 218.3 today from 137.3 yesterday.

The TA-Oil and Gas Index dropped 3.3 percent, while the TA-25 benchmark index retreated 1.5 percent. IPC Oil & Gas Holdings Ltd. (IPC), a partner in the well, plunged 67 percent. Israel Land Development Co. Ltd. (ILDC), also a partner in the well, fell 13 percent. IDB Holding Corp. (IDBH), which has a stake in the well via a unit, dropped 4.8 percent.

Modiin said the partners in the Sara license are studying the data to re-evaluate the oil and gas resources potential at the site and the possibility to do additional exploration drills in the future. Total drilling costs for the partners amounted to $48.5 million, whereas plug and abandonment costs of the well are estimated at $7 million, it said.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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