After the announcement of splitting its upstream and downstream operations, ConocoPhillips (COP) is moving ahead with its objective of discovering greater opportunities in the concerned segments. Recently, the company successfully struck a farmout agreement with Canada-based Realm Energy International Corporation (“Realm Energy”) for possible shale gas exploration in France. However, no licenses have been agreed upon to date.
Realm Energy has applied for exploration licenses for 1.65 million acres in Paris Basin, France. The applications consist of nine separate exploration permits inclusive of all rights for exploration of oil and gas in all formations underlying the land. The deadline for making applications is over.
The objective of such a pact is to jointly carry out exploration activities on the selected exploration licenses that may be awarded as a result of these applications. Realm Energy will be the operator of any permit awarded in the first phase, while ConocoPhillips will retain a right to become the operator of some assets at a later stage.
The special feature of a farmout agreement is a limited carry on exploration expenses and financial incentives depending on acreage attained and activity levels allowed by the government. The farmout agreement is conditional on the company being finally selected by the government for permits for a portion of land in Paris Basin and the joint participation of Realm Energy and ConocoPhillips.
The legislation by the Government of France restricts exploration activities in the Paris Basin in an attempt to ban hydraulic fracturing in extracting unconventional hydrocarbons. Therefore, both companies will need to follow all the relevant legislation governing petroleum operations in France if they are awarded with permit licenses.
ConocoPhillips has a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. We are also Neutral on the stock for the longer term. Marathon Oil Corporation (MRO) and Hess Corporation (HES) are major competitors of the company.
CONOCOPHILLIPS (COP): Free Stock Analysis Report
HESS CORP (HES): Free Stock Analysis Report
MARATHON OIL CP (MRO): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment