Enis Inks Deal to Farm Out 35% in Area 1 to Qatar Petroleum

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Eni SpA E has inked a sale and purchase agreement to sell a 35% participating interest in Area 1, offshore Mexico, to Qatar Petroleum.

Located in the shallow waters of the Campeche Bay, Area 1 will continue to be operated by Eni. The area is estimated to hold 2.1 billion barrels of oil equivalent (90% oil) in the Amoca, Mizton and Tecoalli fields. Eni and Qatar Petroleum are already partners in Block 24 in Mexico, located in the deep waters of Cuenca Salina Basin. Eni is the joint venture operator with 65% participating interest share.

Eni won 100% participating interest in Area 1 in a competitive bid in September 2015.The Production Sharing Contract was inked in December 2015. In July, the Development Plan for Area 1 was approved by Mexico’s National Hydrocarbon Commission (Comisión Nacional de Hidrocarburos, CNH). Till date, the company has drilled five successful wells in the area.

Operations in Area 1 are expected to commence in mid-2019 as development will be phased. Initially, there will be an early phase where the production plateau will be 8,000 barrels of oil per day (bopd). The development will be through a Well Head Platform located on the Mizton field. Production will be transferred onshore through a 10” multiphase line and then processed at an existing Pemex facility.

The production of the full field will commence in early 2021, utilizing a Floating Production, Storage and Offloading facility (FPSO) with a treatment capacity of 90,000 bopd. Two additional platforms will be installed on the Amoca field and one on the Tecoalli field.

Oil production for Area 1 will plateau at 90,000 bopd and 65 million standard cubic feet per day (Mscfd) and eventually reach a total of 102,000 barrels of oil equivalent from 2021. Recently, Eni decided on the Final Investment Decision (FID) for the development of Area 1, with capex estimated at $2 billion.

Eni’s presence in Mexico dates back to 2006,where the company operates through the wholly-owned subsidiary — Eni Mexico S. de R. L. de C. V. — since 2015. Besides Area 1, the company currently holds rights in five exploration and production blocks in the Sureste Basin — Area 7, Area 10, Area 14, Area 24 and Area 28. It is the operator in all the blocks.

In October 2018, Eni signed an agreement to swap participating interest with Lukoil. Eni will farm out a 20% stake in the Production Sharing Contracts (PSC) for Blocks 10 and 14 as well as acquire a 40% stake in Lukoil’s PSC for Block 12. This agreement’s effectiveness is subject to the receipt of relevant authorizations from the Mexican authorities.

Zacks Rank & Key Picks

Currently, Eni SpA carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Cabot Oil & Gas Corporation COG, Enterprise Products Partners L.P. EPD and SunCoke Energy, Inc SXC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Cabot is an independent oil and gas exploration company with producing properties mainly in the continental United States. The company delivered an average negative earnings surprise of 5.7% in the last four quarters.

Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off an average positive earnings surprise of 9.3% in the last four quarters.

SunCoke acquires, owns and operates the coke making and coal mining operations. The company delivered an average positive earnings surprise of 302.6% in the last four quarters.

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