ConocoPhillips
(
COP
) plans to offload its interest in Kazakhstan's giant oilfield,
Kashagan, as per Kazakh Oil and Gas Minister, Sauat Mynbayev.
Located in the North Caspian Sea, approximately 50 miles (80
kilometers) southeast of Kazakhstan, the Kashagan field is regarded
as the largest in the world found in the past 40 years.
KazMunaiGas, the Kazakh state-run oil company, has shown interest
in acquiring the stake that will be divested by ConocoPhillips.
The field, discovered in July 2000, is developed by a consortium
comprising
Eni SpA
(
E
),
ExxonMobil Corporation
(
XOM
),
Royal Dutch Shell Plc
(
RDS.A
), French energy giant
Total SA
(
TOT
), Japan's INPEX Holdings Inc, ConocoPhillips, and
KazMunaiGas.
KazMunaiGas entered the Kashagan project in 2005 as a shareholder
and since then has doubled its stake to 16.81%. The other partners
also hold a share identical to KazMunaiGas barring INPEX with 7.56%
and ConocoPhillips with 8.4% interests.
Eni was in charge of phase I of the field's development, while
Shell was accountable for production operations. However, the
project suffered several delays since its discovery that included
technical problems of extracting oil in an extreme climate and the
presence of sulphide in the associated natural gas. Besides these
hurdles, rising costs have been an impediment, with the latest
deadline now set for late 2012 to mid 2013.
We remain apprehensive of ConocoPhillips' weak production profile,
which experienced a 6.1% year-over-year decline in the most recent
quarter. The decline was mainly due to the impact of divestitures
and maintenance downtime, accompanied with reductions in North
American conventional natural gas. Again, the 2012 production
guidance range was narrowed to 1.565-1.585 million barrels of oil
equivalent (MMBOE/d) from 1.550-1.600 MMBOE/d earlier.
Considering these factors, we maintain our Underperform
recommendation for the company. However, ConocoPhillips retains a
Zacks #3 Rank, which is equivalent to a short-term Hold rating.
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