(Noble Energy story updated for market close, trading action on Wednesday)
NEW YORK (TheStreet) -- Shares of Noble Energy (NBL) - Get Report saw heavy trading action on Wednesday, after the exploration and production company confirmed the largest natural gas find of 2010 off the coast of Israel.

Noble Energy shares were up between 3% and 4% early, and even though the gains were trimmed in the afternoon to 2.5% for the day, the energy company's average daily volume of one million shares was quadrupled on Wednesday, notable during a week when trading across equities has been light due to the holidays.

Noble Energy was the biggest gainer among the U.S. independent energy companies on Wednesday, though it was another bullish day for energy, with the sector up 1%, and after a Tuesday during which many energy companies hit 52-week high levels.

The Leviathan discovery has been among Noble's most closely watched prospects. It's not a surprise that Leviathan looks to be a winner for Noble. However, confirmation from the company that the find is as large as it predicted -- 220 feet of natural gas pay -- is an important step in the exploration process. Indeed, Noble Energy management is known for being conservative and had previously pegged the likelihood of Leviathan becoming a major find at 50-50.

Dan McSpirit, analyst at BMO Capital Markets, said the positive result for Leviathan was somewhat expected. Nevertheless, the sheer size of the find is meaningful. Leviathan is twice the size of its sister discovery, Tamar, which had previously been the largest natural gas find. "Leviathan dwarfs Tamar," the BMO Capital Markets analyst said.

BMO was still running through the numbers on Wednesday morning in terms of financial impact, but the analyst did provide a previous analysis of Leviathan that suggests a big per-share impact for Noble. BMO had run a variety of scenarios for Leviathan, and one included per-share impact if the find turned out to be 200 feet of natural gas pay. Noble Energy stated on Wednesday that Leviathan represents 220 feet of natural gas pay. At this level, BMO Capital Markets had estimated back in October a per-share impact of $9.10. BMO had upgraded Noble Energy to an outperform back in October, in part based on expectation for positive news about Leviathan.

"We've long viewed Noble and its global reach as an investment alternative to what remains a challenged domestic gas story. This characteristic may make for a more defensive thesis today, but one we believe could take on greater distinction and value should the challenges facing natural gas producers prove more chronic than not," the BMO analyst wrote in October.

Even so, it's not as if Leviathan will have a meaningful impact on Noble earnings today, tomorrow or next year. The earliest expectation for production provided by Leviathan is 2016, according to BMO analysis. There are many questions that remain about the road to market for the natural gas from Leviathan, too. Will it be limited to Israel as a market or slated for European delivery? Will Leviathan natural gas be liquefied?

Nevertheless, the heavy trading in Noble Energy shares on Wednesday shows that in the energy sector, investors pay up for exploration more than for current production.

BMO has a $90 price target on Noble Energy. Noble Energy shares closed at $87.16 on Wednesday.

Even if it's going to be 2016 before any of the Leviathan natural gas is tapped by Noble, investors may also be intrigued by all the recent focus by oil majors on gobbling up independent producers of gas. M&A activity in the energy sector is expected to increase in 2011, as the global majors look to finally move into a more aggressive posture in regards to exploration after years of recession and slow global demand.

In addition, several of the oil majors hit fresh 52-week highs on Tuesday, including

ExxonMobil

(XOM) - Get Report

, after a report indicated that as much as $90 billion in asset sales could occur in 2011, twice the level of this year, and predicated on more aggressive exploration budgets. Companies cited as taking a more aggressive asset-sale stance in order to fund exploration included Exxon,

Royal Dutch Shell

(RDS.A)

and

ConocoPhillips

(COP) - Get Report

.

>>Energy Winners: Exxon Hits 52-Week High

"This is the classic case of buying for the E and not for the P. The fact that Noble is being bid up on news that was somewhat expected is evidence that the market buys energy stocks for the E," BMO Capital's McSpirit said, though he stressed that formal analysis of the new data from Noble had not been completed yet by BMO.

Chevron's

(CVX) - Get Report

planned acquisition of

ATLS

(ATLS)

stoked the M&A flames back in November about a flood of natural gas producers being gobbled up by the majors.

BMO Capital Markets analyst McSpirit noted that Noble Energy is also deepening the Leviathan well to drill for oil bearing zones. "There could still be more legs to this story," the analyst said.

-- Written by Eric Rosenbaum from New York.

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