MEO Australia Limited confirmed that
) has drilled a shallow-water appraisal well − the Heron South-1 −
in the Timor Sea, off northern Australia.
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The well − drilled on the NT/P68 exploration permit using ENSCO 109
(350' ILC) jackup rig − remains operated by Eni with a 50%
interest, while MEO Australia holds the rest. This drilling
campaign of Heron South-1 well is in sync with Eni's farm-in
agreement signed last year under which the company will receive 50%
share in the permit.
Drilling operation is expected to take 60 days to achieve a total
depth of 4,230 meters and it aims at verifying the productivity of
the Elang-Plover reservoir and the gas composition.
Separately, Eni holds an option to gain a 50% interest in the
Blackwood gas discovery in the NT/P68 permit. For this, the company
was expected to carry MEO's costs in the course of the acquisition
of a minimum of 500 square kilometer (193 square miles) of 3D
seismic as well as drill one well in the Blackwood area.
Earlier this year, Eni completed the acquisition of the 766 square
kilometer Bathurst 3D survey and has 365 days left since the date
of completion to decide upon whether to drill the Blackwood
exploration well or not.
We believe Eni's constant efforts to expand its upstream operations
and such endeavors in the Barents Sea, Angola, Indonesia and
Australia will go a long way to generate profitable growth in the
Recently, Eni signed a sale and purchase agreement with the U.S.
) for 25% farm-in to three exploration blocks - LB 11, LB 12 and LB
14 - offshore Liberia. The blocks are assumed to be similar to that
of Deep Cretaceous discoveries elsewhere in the West African
Transform Margin such as Mozambique, Ghana and Suriname. The deal
indicates a new market for Eni and will assist the company to
further explore the West Africa Transform Margin.
However, we are concerned about Eni's act of reorganizing projects
at major fields, the closure of the Elgin-Franklin platform off the
British section of the North Sea and liquids losses in Nigeria.
Further, the weak natural gas scenario worldwide, arising out of
continued oversupply and low demand could hurt the company's
performance in the near term.
Eni currently holds a Zacks #3 Rank, which translates into a Hold
rating for the period of one to three months. Our long-term Neutral
recommendation on the company remains unchanged at this stage.