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Independent exploration and production (E&P) company, Canadian Natural Resources Ltd. (CNQ - Analyst Report), announced that it has partnered with Total E&P South Africa BV, a unit of the integrated oil and gas company TOTAL S.A. (TOT - Analyst Report). The partnership plans to explore a block in the Outeniqua Basin, offshore South Africa.

A subsidiary of Canadian Natural, CNR International Limited has entered into a farm-out agreement with Total. Per the agreement, the farmee (Total) has received 50% working interest in the Block 11B/12B and operating rights.

In exchange, the farmor (Canadian Natural) received an upfront cash payment. Apart from that it also recovered half of the earlier incurred costs and a carry in the first exploration well drilled up to a gross cost of $150 million. The joint venture will decide the location of the first well to be drilled. The company may receive additional payment if the prospect shows potential for multi-well exploration and development programs in future.
Spread across 19,000 square kilometers, the block is located about 175 kilometers off the southern coast of South Africa. The area is located in water depth of 200 to 1,800 meters.

Management believes that the South African prospect holds substantial potential, and the association with Total is looked upon as a positive.

Canadian Natural is engaged in the acquisition, development and exploitation of crude oil and natural gas properties. It is one of the largest independent E&P companies in Canada, with extensive heavy crude oil and natural gas developments.

Calgary, Alberta-based Canadian Natural currently holds a Zacks Rank #2 (Buy), implying that it is expected to perform better than the broader U.S. equity market over the next one to three months.

Apart from Canadian Natural, one can also consider other stocks in the E&P industry such as Stone Energy Corp. (SGY) and Matador Resources Co. (MTDR - Snapshot Report) as attractive investment opportunities. Both these stocks sport a Zacks Rank #1 (Strong Buy).

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