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Eni Forays into UAE, Acquires Stakes in Two Concessions

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Eni SpA (E - Free Report) signed two Concession agreements with Abu Dhabi National Oil Company (“ADNOC”). The move is expected to strengthen the company’s footprint in the region, which is known to hold the largest hydrocarbon reserve in the world.

The agreements include two offshore oil blocks in the Persian Gulf and marks Eni’s first expedition into oil development in the United Arab Emirates.

For a total participation fee of about $875 million, the company acquired a 5% stake in the Lower Zakum offshore oil field and o a 10% stake in the oil, condensate and gas offshore fields of Umm Shaif and Nasr. The contract is for a period of 40 years.

Located about 65 kilometers off the coast of Abu Dhabi, Lower Zakum, was discovered in 1963 and was brought online in 1967. Production from the license is targeted at 450,000 barrels of oil per day. Located about 135 kilometers from the coast of Abu Dhabi, Umm Shaif and Nasr have a target production of 460,000 barrels of oil per day.

ADNOC — the operator of the licenses — has a stake of 60% each, while Eni holds the remaining 40%. Eni represents the fourth international company to gain access to one of ADNOC’s new offshore concessions. The agreements add to Eni’s Middle Eastern operations, which comprise producing crude in Libya and Iraq as well as natural gas at Egypt’s largest offshore field — Zohr.

In spite of UAE’s effort to restrain output as part of a global attempt to clear a glut, Abu Dhabi intends to increase output capacity to 3.5 million barrels a day by the end of 2018. Currently, ADNOC can pump about 3 million barrels per day, with less than 50% coming from offshore deposits. Abu Dhabi is believed to hold about 6% of the world’s crude reserves.

Eni’s expertise in exploration of resources will help ADNOC accelerate growth, enhance revenues and improve integration across the upstream value chain. These are a part of the copmpany’s ongoing transformation and are likely to help it build a more robust model that will generate a more profitable upstream business.

Price Performance

During the last three months, Eni’s shares have gained 1.4% against the industry’s 2.2% decline.


Zacks Rank & Key Picks

Eni carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Occidental Petroleum Corp. (OXY - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and ConocoPhillips (COP - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Occidental Petroleum is an integrated oil and gas company. The company delivered an average positive earnings surprise of 24.57% in the preceding four quarters.

Headquartered at Irving, TX, Pioneer Natural Resources Company is an independent oil and gas exploration and production company. The company delivered an average positive earnings surprise of 66.92% in the preceding four quarters.

ConocoPhillips, based in Houston, TX, is a major global exploration and production (E&P) company. The company delivered a positive earnings surprise of 144.45% in the preceding four quarters.

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