BP Delivers First Oil at PSVM

BP Exploration Angola − an affiliate of the British energy major BP plc (BP - Analyst Report) − has commenced production at its ultra-deep water PSVM project in block 31, off the Angolan coast.

Discovered between 2002 and 2004, the PSVM development comprises four oil fields in Angola – Plutão, Saturno, Vénus and Marte. In the first phase of the PSVM development, production from three wells in the Plutão field is expected to increase to around 70,000 barrels of oil per day (BPD). This will likely reach a maximum level of 150,000 BPD in the coming years upon the successful start-up of production from the remaining fields – Saturno and Vénus in 2013 and Marte in 2014.

PSVN is considered the largest subsea development project worldwide and is the second BP-operated venture in Angola after Block 18’s Greater Plutonio. BP expects this development to make a major contribution to Angola’s production thereby generating sizeable returns to the country.

Since the commencement of PSVM’s production, BP generated around 3.5 million barrels of oil and hence development of a hub in the southeast sector of block 31 is already underway.

In the northeastern part of block 31, PSVN lies in a water depth of up to 6,562 feet. BP operates the project with a 26.67% interest and the associate partners Sonangol E.P., Sonangol P&P, Statoil ASA’s (STO - Analyst Report) affiliate Statoil Angola A.S., Marathon International Petroleum Angola Block 31 Limited − a subsidiary of Marathon Oil Corporation (MRO - Analyst Report) − and SSI 31 Ltd hold 25%, 20%, 13.33%, 10% and 5%, respectively. Sonangol E.P. acts as the concessionaire.

This latest start-up is in sync with BP’s agenda to focus on four high-margin areas – Angola, Azerbaijan, the Gulf of Mexico and the North Sea, with an aim to grow output in these areas over the next five years. The enhanced exploration spending will expand its current core areas and the company targets around 35 wells with resource potential in excess of 250 million barrels of oil equivalent.

BP’s third quarter 2012 production shrunk 2.7% year over year, mainly due to field declines and divestments. However; major project start-ups, enhanced operation in Angola and higher output in other areas partly offset the decline. The company expects margin expansion from new projects to drive its future production growth.

BP, UK’s second largest oil company by market value after Royal Dutch Shell plc (RDS.A - Analyst Report), is supported by a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months. BP will report its fourth quarter as well as full-year 2012 earnings on Feb 5, before the opening bell.