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Eni SpA (E - Analyst Report) has made a major gas discovery onshore Pakistan north of its Badhra fields. The find is expected to hold 300 billion cubic feet (Bcf) to 400 Bcf of gas.

About 217 miles north of Karachi, this latest find is situated in the Badhra Area B exploration concession, in the Khirtar Fold Belt region. Drilled at a total depth of 8,038 feet, the exploratory well – Badhra B North-1 – has encountered more than 54 meters of net gas pay in two thick cretaceous sandstones of the Mughal Kot Formation.

The extracted sample from the well confirmed better-quality gas and produced 25 million standard cubic feet per day (MMscf/d) and 35 MMscf/d of gas from the two reservoirs during the production test.

Eni operates the Badhra B block with a 40% interest in the development phase, while its associate partners, U.K.’s Premier Oil Plc, Kufpec Pakistan Limited and Pakistan’s Oil & Gas Development Company Limited own 6%, 34% and 20% stakes, respectively.

The discovery lies 12 miles east of the Italian major’s Bhit gas processing facility, which deals with the gas production from the Bhit and Badhra fields. Eni confirmed that this drilling operation was part of its strategy to refocus on exploration activities in areas adjoining productive fields in Pakistan. The company also added that major prospective finds could yield new pay on new geological models.

Eni has been operational in Pakistan since 2000. Last year, Eni’s equity production in the country averaged approximately 54,800 barrels of oil equivalent per day. The company is already in talks with regulators and project partners to hasten production through a long-term production test for the commercialization of the gas.

We believe Eni’s constant efforts to expand its upstream operations will go a long way to generate profitable growth in the future. Recently, Eni signed a sale and purchase agreement with the U.S. super major Chevron Corporation (CVX - Analyst Report) for 25% farm-in to three exploration blocks – LB 11, LB 12 and LB 14 – offshore Liberia. The blocks are assumed to be similar to that of Deep Cretaceous discoveries elsewhere in the West African Transform Margin such as Mozambique, Ghana and Suriname. The deal indicates a new market for Eni and will assist the company to further explore the West Africa Transform Margin.

However, the weak natural gas scenario worldwide, arising out of continued oversupply and low demand could hurt the company’s performance in the near term. Eni currently holds a Zacks #4 Rank, which translates into a Sell rating for the period of one to three months. Our long-term Neutral recommendation on the company remains unchanged at this stage.

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