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Eni (E) to Merge With Point Resources to Form Vaar Energi

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Eni SpA (E - Free Report) has agreed on a merger with the privately-owned Point Resources to create a leading upstream player in Norway.

The new company — Vaar Energi — will be headed by Point Resources' Vice President Kristin F. Kragseth and will have a portfolio of 17 producing oil as well as gas fields. This will make it one of the largest players on the Norwegian continental shelf with assets spread across the Barents Sea to the North Sea.

In 2018, these assets are projected to yield about 180,000 barrels of oil equivalent per day (boepd).Over the next five years, the company intends to invest more than NOK 65 billion ($8 billion) to develop more than 500 million barrels of oil equivalent (Mboe) in 10 existing fields at a breakeven price of less than $30 per barrel. This will raise output to 250,000 boepd by 2023. The combined reserves and resources of Vaar Energi will be more than 1,250 million barrels of oil equivalent (Mboe).

Subject to regulatory approvals, the merger is anticipated to be completed by the end of 2018. Eni will hold 70% interest in Vaar Energi, while the remaining 30% will be held by P-E firm HitecVision.

Eni’s attempt to increase presence in the Norwegian waters will facilitate the company to expand portfolio through future exploration bid rounds and M&A transactions.

This transaction is another example of consolidation that  is a recent trend. Some of the recent deals include Point Resources’ acquisition of operated assets of Exxon Mobil Corporation (XOM - Free Report) off Norway in 2017 and BP plc’s (BP - Free Report) merger of Norwegian unit with Norway's Detnorske in an all-share deal in 2016 (that formed Aker BP).

Price Performance

In the past three months, Eni’s shares have gained 2.5% compared with the industry’s 9% rise.



 

Zacks Rank & Another Key Pick

Eni currently sports a Zacks Rank #1 (Strong Buy).

Another top-ranked player in the same sector is Occidental Petroleum Corporation (OXY - Free Report) , sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum is an international oil and gas exploration and production company. It pulled off an average positive earnings surprise of 30.2% in the last four quarters.

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