ConocoPhillips COP is on track to divest its entire 40% stake in an oil and gas production sharing block that it operates on the South Natuna Sea Block B off Indonesia. The asset will be purchased by Indonesia’s PT Medco Energi Tbk.
This acquisition is being viewed by many as an attempt by Indonesian officials to strengthen defenses of the nation’s maritime borders by ramping up of energy projects as well as boosting resource nationalism.
The block is located in an energy-rich chain at the edge of the South China Sea in the Natuna Islands. Notably, Indonesia has faced increasingly aggressive maritime moves by China in this region.
If the deal goes ahead, Medco's acquisition of ConocoPhillips' interest in the block off the northwest coast of Borneo island would follow its purchase of a majority stake in Indonesia's second-biggest copper and gold miner, Newmont Nusa Tenggara, for $1.3 billion.
Neither of the companies disclosed any details relating to the transaction. However, a Medco spokeswoman said that the transaction value is much less than the Newmont deal. Medco’s shareholders are expected to vote on this acquisition by the end of September.
The deal, which is expected to conclude by year-end 2016, also covers related transportation systems and an onshore receiving terminal.
ConocoPhillips has been contemplating the sale of its interest in Block B and related facilities in the Natunas since Aug 2015.
The block in the Natunas produces about 300 million standard cubic feet of gas and 30,000 barrels of oil a day. Other partners are Chevron Corp. CVX and Japan’s Inpex Corp., holding 25% and 35%, respectively. ConocoPhillips has been operating the facility for almost five decades and has an operating contract in place till 2028.
The company also has oil and gas assets in other parts of Indonesia’s portion of Borneo island and in the south of Sumatra island.
ConocoPhillips currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector are Enbridge Inc. ENB and Murphy USA Inc. MUSA. Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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