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BP Adds Natural Gas Well to its Asset Base in New Mexico

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Integrated oil and gas major, BP p.l.c. (BP - Free Report) recently announced that its Lower 48 onshore unit has discovered a natural gas well in the Mancos formation of the San Juan Basin located near the border of Colorado. The company believes that the new find has the potential to become an important source of natural gas for the US market.

BP stated that the discovered well (Northeast Blanco Unit 602 Com 1H) is seven miles south of the Colorado border in New Mexico. The average initial 30-day production rate of the well is 12.9 million cubic feet of gas per day, which has been drilled with a 10,000-foot lateral. It is the highest production level that has been recorded in the region in the last 14 years. In 2015, BP acquired the San Juan assets that include the new well. The company started operations here separately using innovative drilling methods and completion techniques and applied data analytics to achieve vital financial and operational improvements. BP has increased its operation in the assets and increased its acreage in the San Juan Basin while keeping its obligation to safety and the environment.

We would like investors to know that BP is currently focusing on its upstream business In the second quarter, total production from upstream operations increased 9% year over year to 2.431 million barrels of oil equivalent per day (MMBoe/d). The addition of the new well to BP’s New Mexico assets is expected to increase its upstream income significantly.

Investors should also know that BP Lower 48 is currently in the process of relocating its headquarters to Denver as part of its plan to increase efficiency, eliminating 40 jobs in Farmington. The new headquarter is expected to come online in 2018. Despite the job cuts, the company has no plans to reduce its investment in the New Mexico assets. In fact, BP Lower 48 expects the headquarter relocation to increase its hold in the San Juan Basin and improve its play further in the Mancos Shale.

About the Company

BP is one of the largest integrated energy firms in the world with a strong and diversified portfolio of development projects. During second-quarter 2017, BP reported better-than-expected earnings, primarily owing to higher liquid and gas prices realizations.However, the oil spill incident of 2010 in the BP-operated Macondo Prospect is still affecting the company. Although BP has cleared the huge litigation expenses related to the spill, it had to divest some of its best operating properties. The asset sales might hinder BP’s future cash generating opportunities going forward. It is to be noted that the lost reserves and production from the group's asset sales cannot be ignored either.

Price Performance

In the last six months, the company’s shares have outperformed its industry. The company’s shares gained 6.7%, while the industry registered an increase of 0.6% in the same period.

Zacks Rank and Stocks to Consider

The company currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector include Braskem S.A. (BAK - Free Report) , TransCanada Corporation (TRP - Free Report) and Global Partners LP (GLP - Free Report) . These sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Braskem’s sales for 2017 are expected to increase 11% year over year. The company delivered an average positive earnings surprise of 107.8% in the last four quarters.

TransCanada’s sales for the year 2017 are expected to increase 0.3% year over year. The company delivered an average positive earnings surprise of 4.1% in the last four quarters.

Global Partners’ sales for 2017 are expected to increase 10.2% year over year. The company delivered an average positive earnings surprise of 415.3% in the last four quarters.

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