Equinor ASA EQNR, a Norwegian energy giant, awarded a substantial drilling contract worth $498 million to Valaris Limited VAL, marking a significant move for the Brazilian oil and gas sector. The contract, awarded through Equinor Energy do Brasil Ltda., a subsidiary of Equinor, pertains to operations offshore Brazil under Project Raia.
This move is part of the development of the Raia field, with operations expected to commence in 2026. The announcement highlights Equinor's strategic investment in Brazil's energy sector, reinforcing its commitment to the region. The contract, valued at approximately $498 million, encompasses a 672-day drilling program, set to begin in the first half of 2026.
Additionally, there is an estimated 180-day standby period where the rig, VALARIS DS-17, may be available for other work, potentially increasing revenues. The total contract duration is estimated to be 852 days.
Equinor owns a 35% stake in the Raia field, with Repsol Sinopec Brasil and Petrobras holding 35% and 30%, respectively. The project includes the drilling of six wells, with oil and gas production anticipated to start in 2028. Once operational, the Raia field is expected to meet up to 15% of Brazil's total gas demand.
Anton Dibowitz, president and chief executive officer of Valaris, expressed his appreciation for the partnership with Equinor, noting that the contract award reflects the quality of their crew and the strong collaborative relationship between the companies.
He highlighted the importance of Equinor's investments in advanced safety and automation technology on VALARIS DS-17 and the trust placed in Valaris to execute development programs offshore Brazil. Dibowitz also emphasized VAL’s commercial strategy of securing new contracts at higher day rates and consistently building its backlog.
This significant investment by Equinor and its partners underscores their joint commitment to expanding Brazil's energy capabilities, while also highlighting the robust demand for advanced drilling solutions and services. The Raia field development is poised to play a crucial role in meeting Brazil's energy needs, contributing to the country's economic growth and energy security.
Zacks Rank & Key Picks
Equinor and Valaris currently carry a Zacks Rank #3 (Hold) each.
Investors interested in the energy sector may look at a couple of better-ranked stocks like Sunoco LP SUN and SM Energy Company SM, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes over 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.26, respectively. The partnership has witnessed upward earnings estimate revisions for 2025 in the past seven days.
SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term value for shareholders.
The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $7.30. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 in the past seven days.
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