Italian energy major Eni SpA (E) has started drilling well 7220/10-1 at the Salina prospect (earlier known as Pulk) in the Barents Sea. The main goal of the exploration is to verify the existence of hydrocarbons in the reservoir.
The well is being spud by Saipem’s semi-submersible rig – Scarabeo 8 – in 341 meters of water. The probe is aiming at a structure having similar geological features as the Skrugard and Havis discoveries located 54 kilometers to the northeast.
Eni, the operator of the well, holds a 40% stake and is accompanied by Lundin, Det Norske Oljeselskap and RWE Dea, holding 20% each. The drilling of the well, situated in Production Licence 533, is expected to take about 54 days.
Per the previous estimates by Lundin, potential reserves at the prospect are about 500 million barrels of oil equivalent.
The newbuild rig Scarabeo 8 just completed the drilling of a pilot hole at the Bonna prospect in the Barents for Eni. The drilling was conducted to obtain further geological information about the play. After fabrication setbacks, the rig was delivered in early 2012 and is likely to commence drilling production wells on Eni’s Goliat oilfield in the Barents by late this year, once the work on Salina probe is concluded.
We believe Eni’s constant efforts to expand its upstream operations by entering new markets and other endeavors in the Barents Sea, Angola, Indonesia and Australia will go a long way in generating profitable growth. Recently, Eni inked a sale and purchase agreement with the U.S. supermajor Chevron Corporation (CVX) for 25% farm-in to three exploration blocks, LB 11, LB 12 and LB 14, offshore Liberia. Management remains upbeat about its long-term upstream delivery potential with its discovery of new fields.
However, we are concerned about Eni’s act of reorganizing projects at major fields, the closure of the Elgin-Franklin platform off the British section of the North Sea and liquids losses in Nigeria.
Eni holds a Zacks #3 Rank (short-term Hold rating). Longer term, we maintain a Neutral recommendation on the stock.
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