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Italian energy giant Eni SpA ( E ) intends to expand its operations in the Ukraine's shale gas arena. With this goal, Eni has entered into an agreement with the country's state-owned national joint stock company Nak Nadra Ukrayny and independent oil and gas producer Cadogan Petroleum Plc.

The agreement gives Eni a controlling interest of 50.01% in LLC WestGasInvest, which currently has subsoil rights to nine unconventional gas license areas in the Lviv Basin of Ukraine, spanning over a total area of about 3,800 square kilometres.

This deal follows the news of Eni, along with its partners, being outbid by Royal Dutch Shell ( RDS.A ) and Chevron Corporation ( CVX ) for acres in the well-known Yuzivska and Olesska areas of the basin.

The Lviv Basin is considered to be among the basins with utmost potential in Europe for the exploration of unconventional gas. Further, the appraisal of Lublin Basin in Poland has also attracted considerable interest from the hydrocarbon industry.

Eni's presence in the Ukraine dates back to 2011 when it signed the Zagoryanska and Pokroskoe licenses. Located in the Dniepr-Donetz Basin, Eni operates the licenses along with its partner Cadogan.

The deal is a major step by the company in its effort to build a worldwide unconventional portfolio. It will also help Eni to strengthen its position in Ukraine and provide a base to grow further in the country.

Eni also holds interest in 3 licenses in Poland's Polish Basin. Currently, the company is operating in the Polish licenses, and leveraging its widespread knowledge and proficiency gained through its joint venture in the Barnett Shale in Texas.

Eni holds a Zacks #3 Rank, which translates to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.

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