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Italian energy giant Eni SpA’s (E - Analyst Report) share price dropped 0.9% on the day it announced an agreement to farm out its 60% stake in Arctic Russia to Yamal Development – a 50:50 joint venture between Novatek and GazpromNeft. However, the stock price moved up 0.1% and 0.5% in the next two trading sessions to close at $48.67 on Nov 22.

Per this deal signed in Moscow, Eni will divest its stake in Arctic Russia, which owns 49% of Severenergia. The Russian oil and gas company holds four licenses for the exploration and production of hydrocarbons in the region of Yamal Nenets. The yield from these licenses is anticipated at about 36 billion cubic meters of gas and liquids through 2017.

Eni will raise cash proceeds of $2.94 billion from the sale. The transaction is subject to receipt of necessary approvals. Upon closure of the transaction, Eni will not have any stake in Severenergia, while Yamal Development’s share in SeverEnergia will rise to 80.4%.

With this sale, Eni has exited from the upstream assets of Siberia that had matured considerably. The sale is in sync with its strategy of creating value for its shareholders.

Eni’s exit from Arctic Russia has not severed its relation with Russia. The company still remains the biggest buyer of natural gas from Gazprom and a major buyer of oil from Rosneft.

Eni and Rosneft are also joint venture partners relating to exploration of promising assets in the Black Sea and the Barents Sea. Moreover, Eni partners Gazprom in the South Stream project which, once completed, will deliver 63 billion cubic meters of gas annually, contributing substantially to the European security of supply.

Eni carries a Zacks Rank #3 (Hold). However, there are other sector stocks – SM Energy Company (SM - Analyst Report), Abraxas Petroleum Corp. (AXAS - Snapshot Report) and Western Gas Partners LP (WES - Snapshot Report) – that hold a Zacks Rank #1 (Strong Buy) and are worth buying now.

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