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UK supermajor BP plc (BP - Analyst Report) has obtained three deepwater exploration blocks offshore Uruguay. The company’s announcement of the award of the blocks, secured in the second offshore licensing round in Uruguay in March 2012, was on the heels of the production sharing contract signing in Montevideo.

BP gained access to Block 6 in the Punta del Este basin as well as blocks 11 and 12 in the Pelotas basin, together spanning across almost 10,039 square miles (26,000 square kilometers). The blocks are situated about 50-100 kilometers off the Uruguayan coast, southeast of Montevideo. These blocks lie at water depths of 50 to 2000 meters.

BP has a 100% stake in each of the blocks, while Uruguayan state oil company, ANCAP, holds an option to participate for up to 30% in any discoveries.

BP will be responsible for performing 2D and 3D seismic acquisition on the blocks during the initial three-year exploration phase of the contracts. The seismic work will likely commence by 2013.

Several other companies – Total SA (TOT - Analyst Report), BG and Tullow Oil plc - were also awarded blocks in Uruguay in the licensing round in March. Initially, ANCAP had received 19 offers for eight of the 15 offered blocks. These awards expand the number of players operating offshore Uruguay to seven from the existing three - Petroleo Brasileiro S.A. or Petrobras (PBR - Analyst Report), YPF and Galp Energia.

BP considers its entry into this region in Atlantic to be highly value accretive as the deepwater basin remains largely unexplored. The company is enthusiastic about working with ANCAP, as it will help it in better understanding the potential of the blocks.

We expect BP's new strategy of active portfolio management, higher exploration activity, and refining and marketing repositioning to generate value for shareholders.

BP has a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.
 

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