As operator of the massive Tamar and Leviathan gas fields offshore Israel, Houston-based oil and gas producer Noble Energy (NBL) has a truly massive opportunity in the Eastern Mediterranean region. The company recently made a big move to validate the value of these assets by locking in a long-term sales contract with two major customers. Let's take a closer look.

Noble inks supply contract in Jordan
On Wednesday, Noble announced that it has signed a gas sales agreement to supply two customers with natural gas from its operations at the Tamar field. Under the terms of the contract, Noble will supply the Arab Potash Company and the Jordan Bromine Company with approximately 66 billion cubic feet of natural gas over the next 15 years.

Gas sales are expected to commence in 2016, after the requisite pipeline infrastructure to transport the gas has been constructed. Noble will sell the gas based on a floor price of at least $6.50 per thousand cubic feet, with upside linked to Brent crude oil prices.

The agreement marks the second major contract secured by Noble to export its gas to neighboring countries. Last month, it inked a 20-year agreement with the Palestine Power Generation Company to supply gas from Leviathan. For Noble, these long-term supply agreements are crucial, because they validate the value of the company's Eastern Mediterranean assets.

Strong local export market
They also highlight the strong demand for natural gas in the region and bode well for additional lucrative contracts in the months and years ahead. Keith Elliott, Noble's senior vice-president for the Eastern Mediterranean region, noted that the agreement with Jordan is evidence of "the growing regional opportunities for our natural gas."

Further, by supplying gas to nearby places such as Jordan and Palestine, Noble will generate stronger returns than it would exporting the gas to more distant markets such as Europe. That's because shipping the gas to neighboring markets can be accomplished with a few miles of pipelines, whereas exports to Europe would require the construction of expensive liquefied natural gas export facilities.

Tamar, discovered by Noble in 2009, was the largest conventional gas discovery in the world that year. The field, which is estimated to contain as much as 9 trillion cubic feet, or tcf, of gas, began pumping gas in March of last year. Leviathan, discovered in 2010, is even bigger, with an estimated resource potential of 19 tcf, enough to meet Europe's gas demand for a year. Production from the field is expected to commence in late 2017.

Noble also announced earlier this month that it has signed a non-binding agreement to sell a quarter of its stake in Leviathan to Australia's Woodside Petroleum (WPL 0.83%) for $1.03 billion in cash and future revenues. By doing so, the company will benefit from Woodside's offshore drilling expertise and strong working relationships with Asian LNG buyers.

Noble's other opportunities
In addition to its massive opportunity in the Eastern Mediterranean, which represents a resource potential of about 40 trillion cubic feet, Noble also has sizable stakes in onshore U.S. resource plays, most notably in Colorado's DJ Basin and Pennsylvania's Marcellus shale. Fourth-quarter volumes from these plays surged 16% and 61% year over year, respectively, and should continue growing at a strong pace this year as regional infrastructure improves.

Returns from both plays should also continue to improve. In the DJ Basin, Noble is seeing major efficiency gains from its recent acreage swap with Anadarko Petroleum (APC) and its Integrated Development Plan approach, which has already reduced well costs by $0.4 million to $0.8 million per well. In the Marcellus, the company is working with joint venture partner CONSOL Energy (CNX 6.91%) and is seeing stronger results by using shorter spacing between frac stages.

The bottom line
Having secured two major gas supply agreements and with additional contracts likely to be signed in the year ahead, Noble can now focus on optimizing its development program in the DJ Basin, Marcellus, and Tamar. In addition to these three key regions, the company's operations in the Gulf of Mexico and West Africa position it extremely well to deliver double-digit production growth over the next several years.