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Zion Oil & Gas, Inc. (ZN): Good Speculative Play or Stay Away?

Noble Energy also has big stakes in the confirmed oil fields of Israel and has been producing oil off Israel’s shores since 2004. The company is arguably one of the better positioned plays on Eastern Mediterranean oceanic resources, as Noble has a potentially lucrative, large presence in Cyprus as well. Noble is one of the largest oil companies in the world and has been doing very well so far this year. The corporation has an impressive profit margin of 25.1% and an operating margin of approximately 27.2%. Noble had reserves of 1.2 billion barrels of oil and assets totaling over $17 billion at year-end 2012.  Zion has precisely zero barrels of proven oil and zero net revenue.

Woodside Petroleum is Australia’s largest natural gas and oil company. It’s taking the steps necessary to buy in to Israel’s proven reserves. Although the company’s stock chart has remained relatively flat since Zion’s IPO, it certainly hasn’t lost 85% of its value and, like Delek and Noble Energy, sports a dividend payment. Dividends (or the lack thereof) are yet another reason why Zion should not be on your shortlist.

Woodside Petroleum had a record-breaking 2012, with a 30% increase in sales revenue, a 98% increase in net profit, and a 55% increase in operating cash flow. Woodside is definitely going in the right direction and has even more room to grow.

The Bottom Line

If I were to invest in Zion Oil & Gas, it would only be a very small experimental position in the stock because the company is a speculative play on the natural gas boom and potential in Israel. Zion Oil & Gas is not a strong, viable company at this point. There is no compelling reason to jump on the ship at this point. If any important positive developments do occur within the company, there would still be plenty of room left for upside to buy into Zion. I would strongly caution not buying a large position in the company, if you even want to risk your money at all. Zion Oil & Gas is a definitive example of a company that puts the “long” in “long-term investment.” In contrast, Delek, Noble Energy, and Woodside Petroleum have not only been more successful than Zion, but have much better prospects for the future.

Evan Buck has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Zion Oil and Gas: Good Speculative Play or Stay Away? originally appeared on Fool.com and is written by Evan Buck.

Evan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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