Italy's leading energy company by market value, Eni SpA (E - Analyst Report) has signed a Completion Deed with Russian state-owned oil company Rosneft.
The pact relates to the joint development for exploration activities in the Fedynsky block and Central Barents block in Russian Barents Sea as well as Western Chernomorsky block in the Black Sea. These three blocks are estimated to hold total recoverable resources of 36 billion barrels of oil equivalent.
The projects are part of the wider cooperation between Eni and Rosneft, approved under the Strategic Cooperation Agreement entered into by the parties on Apr 25, 2012. These agreements also entail the joint development of the Russian offshore blocks, technological and staff exchange as well as Rosneft’s involvement in Eni’s international projects.
Three joint venture companies were formed by Eni and Rosneft to operate the Russian offshore projects. Rosneft will have a stake of 66.67% in these joint ventures, while Eni (with a stake of 33.33%) will bear the total cost of oil and gas exploration activities, per the conditions provided in the existing agreements. Moreover, Eni will reimburse Rosneft for one third of the expenses on the acquisition of licenses.
Spread over 38,000 square kilometers in the ice-free southern part of the Barents Sea, water depth at the Fedynsky block ranges from 200 meters to 320 meters. In conformity with the license conditions, 6,500 kilometers of 2D seismic needs to be completed at the Fedynsky block prior to 2017 and 1,000 square kilometers of 3D seismic by 2018. One exploration well should be drilled before 2020 and, if successful, another exploration well will be drilled within 5 years.
The Central Barents block connecting Fedynsky to the North, has a water depth of 160–300 meters. It is essential to carry out 2D seismic in 3,200 kilometers by 2016 and 3D seismic in 1,000 kilometers by 2018. The first exploration well is to be spud by Jan 2021, and upon succeeding, another exploration well is to be drilled in 5 years.
The third area to be jointly explored is the Western Chernomorsky block in the Black Sea. The block spans 8,600 square kilometers with water depth varying from 600–2,250 meters. Rosneft has performed seismic works to evaluate the area in its entirety and recognized 6 promising leads with high potential. In line with license obligations, two exploration wells are to be spud in the 2015–2016 time frame.
Eni carries a Zacks Rank #3 (Hold). However, there are other Zacks Ranked #1 (Strong Buy) stocks – Hornbech Offshore Services, Inc. (HOS - Snapshot Report), Newpark Resources Inc. (NR - Snapshot Report) and Gulfmark Offshore, Inc. (GLF - Snapshot Report) – that are expected to perform impressively over the short term.