Eni Australia Ltd − the Australian subsidiary of Italian oil and
gas company
Eni SpA
(
E
) − confirmed that it will take over ENSCO 109 (350' ILC) jackup
rig to drill the Heron South-1 well in the Timor Sea, off northern
Australia.
The well will be drilled on the NT/P68 exploration permit where Eni
serves as the operator with a 50% interest, while MEO Australia
Limited holds the rest. The company was expected to take control of
the rig on August 15 that would then go on board on a four-day tow
to the Heron South-1 location. The rig is scheduled to reach the
well location on or around August 19, with drilling likely to begin
several days later.
The drilling campaign of Heron South-1 well is in sync with the
Eni's farm-in agreement signed last year under which the company
will receive 50% share in the permit. Following the drilling
operation, the company will have 60 days to decide on whether to
drill a second Heron well or withdraw from participation in the
area.
Meanwhile, under a separate pact, 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
future.
With the expected strengthening of the global economy and
production ramp-up in the existing fields of Libya, we believe that
Eni offers ample long-term visibility into profitability over the
coming quarters.
Recently, Eni signed a sale and purchase agreement with the U.S.
supermajor
Chevron Corporation
(
CVX
) 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.
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