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Italian energy giant Eni SpA (E - Analyst Report) and Russia's state-controlled Gazprom have agreed to lower Russian gas supply prices for 2013.

Both the companies have also slated year-end 2013 for the completion of renegotiations on the prices and amount of the Russian gas supplies for 2014 and beyond. Gazprom supplies contribute around 25% of Europe’s gas. The financial detail of the pact with Gazprom has not been disclosed by Eni.

Eni along with other European buyers have been insisting Gazprom for discounts. Gazprom’s average gas price touched a record in 2008 but a downturn curtailed demand for fuel and made gas available at reduced market prices.

Under multi-year contracts, connected to crude and oil-product prices, Gazprom sells the fuel with a time lag of six to nine months.

The parties also talked about advancing on the South Stream project and confirmed that the pipeline construction is targeted to commence by the second quarter of 2014, while the first gas is expected in 2015.

Eni’s presence in Russia dates back to the early fifties. The company entered the upstream segment of the country in 2007. Currently, it produces 15,000 barrels of oil equivalent per day from the Samburskoye field in Western Siberia.

Eni’s outlook for the upcoming months is favorable, given its 2013–2016 strategic plans to enhance production and implement steps to control costs and recover profitability. The company remains upbeat on its production growth target of more than 4% annually in the said period and 3% annually until 2022.  

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.

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