Doubts about Noble's (NBL) future in the Falkland Islands have been limited to Cristina Kirchner's threats. At the moment, Noble's prospects in the Falkland Islands are especially good, and it will not be a surprise if Noble slowly enters Argentinean waters as well. However, for that to happen, Cristina will have to lose the elections next year. Noble is already active in the Falkland Islands, and the potential profits and revenue to the company are astounding.
Argentina's President forbade Noble and other foreign companies from operating in the Falkland Islands. However, her tactics do not seem to be working in her favor. When the news broke out that she may seek an additional presidential term when the elections are held mid-next year, almost a million people protested on the streets of Buenos Aires. This was one of the largest anti-government protests ever.
Noble has decided to forge ahead with its plans to explore and drill in the islands without worrying about what the consequences may be. This is also because most political analysts believe that Cristina will not be able to retain her post in the next election. That prophecy seems to be coming true, when we look at the mass protests that are taking place across Argentina at the moment.
The Argentinean economy is in shambles and the country really is not interested in the Falkland Islands. Most Argentineans believe Falklanders get to choose whether they belong to Britain, Argentina or to themselves. Industry analysts have noted that as long as the British Navy is in place and as long as the Falklanders do not give into empty threats made by Kirchner, oil companies operating in the islands will be safe.
For a company like Noble, it is very important to stay put in the islands. Its competitors are all over the place in South America, but Noble is one of the few companies that have managed to sign deals with the Falkland Islands' government. The deal allows Noble to explore in and around the islands for oil and natural gas. It is estimated that the surrounding sea holds a vast amount of oil and natural gas, all waiting to be explored and drilled. Noble entered into a farm-in agreement with Falkland Oil & Gas Ltd. in August 2012 and holds a 35% operating interest in most of Falkland Oil & Gas Ltd.'s licenses.
Noble has also agreed to invest $180 million to $230 million on exploration. Susan Cunningham, senior vice president for exploration, insisted that above-ground risk is very manageable and that the regulatory environment is very favorable. There was no mention of Kirchner or her divaesque threats. And that is because Cristina is no longer relevant.
Noble's competitor Desire recently (November 23rd) announced that it has an 'excellent exploration potential' in the Falkland Islands. Consequently, its stock rose by 1%. The company rated its chances of success at the Sea Lion complex at an astounding 80%.
In 2010, Rockhopper Exploration made a very important discovery in the shallow-water North Falkland Basin. Thus, the Sea Lion region kick started the Falkland Island's current oil craze that has attracted almost every big oil company worth its name. Rockhopper announced in 2011 that it discovered nearly 450 million barrels of oil, which can turn around the Falkland Islands' economy. Other major oil companies have been put off by the dispute the Falkland Islands has with Argentina.
Chevron (CVX), Exxon Mobil (XOM) and Anadarko (APC) have all refrained from signing deals with FOGL. Chevron has a successful oil and gas business in Brazil but has been marred by environmental disasters. It had to spend millions in cleaning up when oil leaked onto the coast. According to classified documents leaked by WikiLeaks, Exxon Mobil felt that Falkland Islands had very little oil. The company did not show any further interest after that statement, and it probably regrets it now.
Exxon Mobil has the kind of infrastructure it takes to explore in a place like the Antarctic Ocean. Anadarko on the other hand has been quiet about its ambitions in the Falkland Islands. This probably is due to the fact that it does not want to cause an upheaval between Argentina and Britain.
Noble Energy is one of the few oil companies that have consistently had good records. The company currently trades at $95 and is certainly in a better position than many other companies. Noble's price to book ratio is 2.11 and its price to sales ratio is 4.09, which suggests that it is doing favorably, when it is compared with its rivals. Moreover, Noble has been consistently declaring positive revenues.
At the moment, Noble's revenue is $4 billion and its profit margin is 11.62%. The company's operating margin is 11.40%. These numbers suggest that investors need not worry about fluctuations in the coming months. Moreover, the numbers will tend to be bullish because of the Falkland Islands project. Noble has an operating cash flow of $2.6 billion, which is quite a significant amount. The company stands to gain in the long-term thanks to all its wise investments across the world. The Falkland Islands will of course be the cherry on the cake.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.