U.S. oil behemoth ConocoPhillips (COP) has started preliminary work so as to carry out exploration activities in Bangladesh's offshore gas field this October.
In June, ConocoPhillips inked a 9-year production sharing contract (PSC) with the Bangladesh government and state-run Petrobangla to explore hydrocarbon in the virtually untapped deep waters of the Bay of Bengal. The deal entitles the U.S. integrated giant to explore two blocks, DS-08-10 and DS-08-11, in both of which ConocoPhillips holds a full 100% working interest. The blocks cover a total area of 5158 square kilometers (1.27 million acres) and are located 1000–1500 meters (3,300–5,000 feet) under water. The awarded acreages are located about 280 kilometers (175 miles) from the port city of Chittagong.
ConocoPhillips intends to invest approximately $52 million in the initial exploration period of five years, with $58 million and $50 million to be invested in two subsequent extension periods for 2 years. Under the contract, Petrobangla will share profits of a minimum of 55% to a maximum of 80% for natural gas, and a minimum of 60% to a maximum of 85% for oil or condensate.
The deepwater area of Bangladesh –– with proven reserves of 7.3 trillion cubic feet (Tcf) of gas and probable reserves of 5.5 Tcf –– remains almost unexplored. The country currently consumes over 2,500 million cubic feet (MMcf) of gas per day, against its production of approximately 2,000 MMcf per day.
Houston, Texas-based ConocoPhillips is a major globally integrated oil company engaged in exploration and production of oil and natural gas, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.
With leading positions in both natural gas and heavy crude oil in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions, we believe ConocoPhillips will be able to replace reserves and sustain production growth over the long term.
However, considering the company’s sensitivity to changes in crude oil price, geopolitical risks associated with international operations and operational challenges, we prefer to stay on the sidelines at this moment and maintain our long-term Neutral recommendation on the stock.
ConocoPhillips, which competes with Marathon Oil Corporation (MRO) and Hess Corporation (HES), currently retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
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