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BP to Ramp Up Kirkuk Output, Signs Deal with Iraq

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BP p.l.c. (BP - Free Report) recently signed an agreement with Iraq’s state-run North Oil Company that would boost production from the country's Kirkuk fields. Iraq plans to triple production from the prolific field that was reclaimed by Baghdad in 2017 and is located in the northern region of the country.

BP is expected to ramp up production from six locations in the field — which is Middle East's one of the biggest and oldest oilfields — with a production target of more than 1 million barrels per day (BPD). The company signed a memorandum of understanding in January with the Iraqi government regarding increasing the production, which took a step further recently. BP is expected to carry out seismic survey operations in the area and look for technical obstacles associated with the field. Per BP's estimates, the Kirkuk oilfield holds around 9 billion barrels of recoverable oil.

The government intends to use trucks to ship oil from the Kirkuk field to Iran. Although the region has been recaptured by Baghdad from the Kurdistan Regional Government, the road to the border of Iran is not safe from the Islamic State radicals.

In 2013, BP and the Iraqi government signed a deal to stop the slump in Kirkuk's output. The London-based energy giant provided North Oil Company with technical assistance for production capacity increase at the field, which was taken over by the semi-autonomous Kurdistan Regional Government a year later. The Kurds used to export crude from the field to Turkey through pipelines, which was halted by the Iraqi government once they regained the region.

Notably, Iraq is the second largest producing member of the Organization of Petroleum Exporting Countries (OPEC). Although the country's production capacity has almost reached 5 million BPD, it is producing at a lower rate of 4.45 million BPD as part of an output-cut agreement with fellow oil exporters in an attempt to clear a supply glut.

Price Performance

BP has gained 8.8% in the last month compared with 5.5% growth of its industry.

Zacks Rank and Other Stocks to Consider

BP sports a Zacks Rank #1 (Strong Buy).

Investors interested in the Energy sector can opt for other top-ranked stocks in the same space like Nine Energy Service, Inc. (NINE - Free Report) , Oasis Midstream Partners LP (OMP - Free Report) and CNOOC Ltd. (CEO - Free Report) . While Nine Energy Service sports a Zacks Rank #1, Oasis Midstream and CNOOC carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Nine Energy Service is an onshore service provider. For 2018, the bottom line is likely to be up 33.4%. In the last reported quarter, the company delivered a positive earnings surprise of 6.3%.

Houston, TX-based Oasis Midstream is an integrated energy partnership. The company’s revenues for 2018 are anticipated to improve 29.3% from the prior-year quarter, while its earnings are expected to increase 346.5%.

Hong Kong-based CNOOC is an integrated energy company. The company’s top line for 2018 is anticipated to improve 49% year over year, while its bottom line is expected to increase 82.8%.

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