Italian energy company, Eni SpA (E) has won the natural gas exploration rights in the Arguni 1 block of eastern Indonesia.
Under the contract, Eni has been awarded full 100% participation interest and operatorship of the Arguni 1 block, located on and offshore in the West Papua Province. With an area of 5,386 square kilometer in the natural gas rich Bintuni Basin, the Arguni 1 Block attracts major oil giants with loads of hydrocarbon discoveries.
The deal includes the drilling of two wells as well as 500 kilometer of 2D and 200 square kilometer of 3D seismic surveys during the first three years of the company's exploration plans.
Eni has been working in Indonesia since 2001 and gathered working interests in twelve permits, out of which it operates in six. Recently, the company has made a successful discovery at Jangkrik, located in the Muara Bakau permit area in the offshore Borneo of Indonesia. Eni has already submitted the developmental plans for the discovery.
The company also remains operational in the Tarakan and Kutei Basins, offshore Kalimantan, north of Sumatra and West Timor. It is engaged in the development of the Ganal and Rapak blocks with considerable gas reserves in the Kutei Basin.
Moreover, through the VICO CBM Limited joint venture, Eni won a new coal-bed methane (CBM) production sharing contract and acquired an interest in Sanga Sanga CBM. Eni with its 50% interest enjoys the operatorship of the joint venture, while BP Plc (BP) holding the balance stake. CBM from Sanga Sanga will be liquefied at the Bontang plant, representing the first liquefied natural gas facility to receive CBM supplies.
We believe Eni’s outlook for the upcoming months is favorable given its 2011–2014 strategic plan to enhance production and implement steps to control costs and recover profitability. The company remains upbeat on its production growth target, expecting it to increase more than 3% annually in the said period. Eni expects hydrocarbon production to increase to more than the 2.05 million barrels of oil equivalent per day level by 2014.
However, unpredictable global economic conditions, volatile oil and gas fundamentals and operational disruptions in international regions keep us on the sidelines for the time being.
Our long-term Neutral recommendation remains unchanged at this stage. Eni currently holds a Zacks #3 Rank, which translates into a Hold rating.
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