) recently entered into an exploration and development deal with
Canada-based Canacol Energy Ltd. The deal entails the companies
to drill shale oil in Colombia's Middle Magdalena basin.
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The U.S. energy company intends to shell out $13.5 million in
cash for the drilling, completion and testing of about 13 wells
to earn 70% of Canacol's working interest in the Cretaceous
section of the Santa Isabel project. This agreement will enable
the companies to carry out the exploration and development of the
Santa Isabel contract.
Santa Isabel is one of the five exploration and production
(E&P) pacts under which Canacol has interests in 334,000 net
acres of shale oil potential. The five contracts are VMM 2, VMM
3, Santa Isabel, COR 39 and COR 11.
This is also the third following the addition of two major
international oil companies − the local units of
Royal Dutch Shell plc
) − on Canacol's Colombian acreage. Canacol will retain its 30%
stake as well as the full rights of shallower reservoirs.
The companies plan to spud the first exploratory well on Santa
Isabel, Oso Pardo 1, in the second quarter of 2013. This will be
to test the light oil and shale oil targets in the Tertiary
Lisama and Creteaceous reservoirs.
Meanwhile, the deal is also in sync with ConocoPhillips' strategy
to focus its spending on North American shale development as well
as other regions. It enables the company to get a foothold in a
large unconventional shale oil play. With leading positions in
both natural gas and heavy crude oil in North America, as well as
a legacy position in the North Sea and growing exposure to
lucrative international regions, ConocoPhillips expects to
replace reserves and sustain production growth over the long
We have a Zacks Rank #3 (Hold) for ConocoPhillips - the third
biggest U.S. integrated oil company after ExxonMobil and