Noble’s numbers look good
With a market cap of $22 billion and an enterprise value of $25.44 billion, Noble Energy is a very large company. Its PEG ratio of 1.42 suggests it is walking in the overvalued territory. However, it is highly profitable, with a profit margin of 26.04% and an operating margin of 27%.
Moreover, there are chances that the company’s dividends in the future will increase. The company’s assets include several oil fields that are yet to be monetized, such as those in Nicaragua and the Falkland Islands. In the long term, these oil fields have immense potential, whether in terms of actual commercial energy or by way of divesting them.
Noble has a formidable presence in Nicaragua
Chevron Corporation (NYSE:CVX), one of Noble’s larger competitors pulled out of Nicaragua as far back as 2010. In fact, it pulled out of most Central American countries in 2010. Chevron Corporation (NYSE:CVX) is trapped in an environmental case in Ecuador that may force it to cough up billions of dollars. In August, Ricardo Patino, Foreign Affairs Minister of Nicaragua and Daniel Ortega, the president of Nicaragua, took Ecuador’s side on a visit to that country.
Similarly, Exxon Mobil Corporation (NYSE:XOM) has had an unstable history in Nicaragua. The company sold its assets to Puma Energy in 2012. Exxon Mobil Corporation (NYSE:XOM) refused to refine oil from Venezuela, a country that is cordial with Nicaragua. This contentious situation led to a tiff between Ortega and the executives at Exxon Mobil Corporation (NYSE:XOM). With Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) not in the Nicaraguan picture, Noble Energy remains the sole big oil company in that region. This makes the company more attractive to those who are not fazed by minor setbacks.
Conclusion
At a glance, it does seem like Noble Energy, Inc. (NYSE:NBL) has chosen unconventional locations to drill and explore, and that this may cause problems in the future. On a closer look though, these choices are well planned and potentially highly profitable. The wells and fields in Nicaragua may significantly boost Noble’s income and help the company to consolidate its position in a region that is rich in oil but with very few large competitors. Noble is a good investment option for those who are willing to do their homework and read a little about Latin American geopolitics.
The article Nicaragua: 5 Reasons Why Noble Energy Is Right originally appeared on Fool.com and is written by Jaiyant Cavale.
Jaiyant Cavale has no position in any stocks mentioned. The Motley Fool recommends Chevron.
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