Italian oil major Eni SpA (E) has agreed to acquire a 40% stake in the Evans Shoal gas field in offshore Australia from the domestic firm Santos Ltd. As per the initial agreement, signed in late October, Eni will purchase stakes in the concession for a preliminary payment of $250 million and a contingent future cash payment of up to $100 million.
However, Eni’s payment for the acquisition is subject to the approval of the Final Investment Decision on the project for the development of Evans Shoal acreage and on the basis of the level of 2P reserves.
Located in the Timor Sea, the field is in the NT/P48 exploration block in the north Bonaparte Basin, around 186.4 miles to the northwest of Darwin. Evans Shoal field was discovered in 1998 and remains largely undeveloped. It is estimated to hold 7 trillion cubic feet of gas.
With the completion of this deal, Eni will sell a 7.5% interest in the aforesaid block to the Australian unit of Royal Dutch shell plc (RDS.A). Correspondingly, the block will be shared by Eni (32.5%), Shell (32.5%) – acting as the operator, Petronas Carigali (Australia) Pty Ltd (25%) and Osaka Gas Australia Pty Ltd (10%).
Eni shares a decade-long business tie with Australia, where it has 16 offshore exploration and production licenses. The company remains highly committed to the development of the resources in the vast exploration area. The company targets to drill a well and conduct necessary testing in the second half of 2012.
We expect Eni to reap strong benefits from other prominent Australian ventures, Woollybutt oil field and Blacktip Gas Project – where it enjoys sole operating rights. The company is also involved with the Bayu-Undan venture, Kitan project as well as the Darwin liquefied natural gas plant.
Eni with its consolidated subsidiaries is engaged in oil and gas, electricity generation, petrochemicals, oilfield services and engineering industries. The company carries out offshore and onshore hydrocarbon field construction and offers offshore and onshore drilling, and offshore design and engineering services for oil and gas companies.
We remain confident about Eni’s long-term upstream delivery potential with various endeavors across the globe. Several projects in Iraq, Angola and Russia are expected to contribute immensely to the company’s production base, going forward.
However, we expect the company to perform in line with the broader industry as a whole and rate the stock Neutral on a long-term basis. Eni holds a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months.
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