Italy's integrated energy company Eni SpA ( E - Analyst Report ) plans to boost its capital spending in Indonesia for 2013 as it aims to drill more wells. The company intends to invest approximately $1.2 billion next year in Indonesia, up from the targeted $400 million for this year.

In May, Eni was awarded a 100% participating interest in the East Sepinggan block at the first Indonesian International Bid Round in 2012. Located around 170 kilometers southeast of the Bontang LNG processing facility offshore East Kalimantan, the block spreads over 2,913 square kilometers in the Kutei Basin — a hydrocarbon rich region where numerous giant discoveries are currently in production.

The company is engaged in expanding its exploration foray in the rapidly growing Far East oil and gas market. This award follows Eni’s contracts for the North Ganal block in Kutei Basin and Arguni I block in Bintuni Basin in the country in November last year. Eni is also the operator of the North Ganal block. Eni's areas of operations include the Muara Bakau, Bukat, Arguni, Krueng Mane and West Timor blocks.

We believe Eni’s constant efforts to expand its upstream operations and such endeavors in Barents Sea, Angola, Indonesia and Australia will go a long way in generating profitable growth in the future.

Although Eni has been experiencing declining production volumes over the last few quarters, management remains upbeat about its long-term upstream delivery potential with its discovery of new fields.

Eni’s outlook for the upcoming months looks favorable, given its 2012–2015 strategic plans to optimize the production cycles, while reducing costs and utilizing its proprietary technology. The company remains upbeat on its production growth target, expecting it to increase more than 3% annually in the said period from the previous 2% until 2021.

However, we are concerned about Eni’s refining business as its underlying fundamentals are still weak following political disturbances in the Middle East, which could suppress production. Hence, we expect the company to perform in line with its peers, like Statoil ASA ( STO - Analyst Report ) , and the industry as a whole, and rate the stock Neutral.

The company retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.