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Italy’s Eni SpA (E - Analyst Report) has inked a Production Sharing Agreement (PSA) with the Ukrainian government relating to the exploration and development of acreage in the Ukrainian sector of the Black Sea. The acreage comprises the Subbotina oil discovery.

Located in the eastern part of the Crimean peninsula, the 1,400-square kilometer patch provides extensive exploration opportunities. According to Eni, licenses for Abiha, Mayachna and Kavkazka – together known as the Pry Kerch block – are also part of the deal.  The Pry Kerch block is considered to contain numerous oil and gas prospects.

The Milan-headquartered oil major holds a 50% interest in the block. The other partners include state oil venture Nadra Ukrainy’s subsidiary Vody Ukrainy, state gas player Naftogaz’s Black Sea arm Chornomornaftogaz and France’s EDF holding 35%, 10% and 5%, respectively.

Eni did not disclose the investment involved in the PSA. However, the Ukrainian Energy Minister revealed through a news agency that the project could entail an investment of about $4 billion.

Eni’s expertise in exploration, development and production in similar reservoirs as well as its immense understanding of the technologies necessary for the development of offshore activities will assure the success of the project.

Last year, Eni was one of the majors to be defeated in bidding on a pair of Ukraine shale blocks, where Royal Dutch Shell plc (RDS.A - Analyst Report) and Chevron Corporation (CVX - Analyst Report) emerged winners.

Eni’s constant efforts to expand its upstream operations in Cyprus, Egypt, Vietnam, Indonesia, Pakistan and Kenya will go a long way in generating profitable growth in the future. Moreover, project start-ups, inputs from big projects in Algeria, Iraq, Australia, Russia as well as Egypt, as well as its strategic position in non-conventional gas, are expected to augment volumes going forward.

Eni carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is SM Energy Company (SM - Analyst Report), which holds a Zacks Rank #1 (Strong Buy).
 

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