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Eni (E) Inks LOI With BP to Acquire Operatorship in Libya


Eni SpA E inked a Letter of Intent (LOI) with National Oil Corporation (NOC) and BP plc BP. Per the agreement, the company will be able to acquire a stake of 42.5% in BP’s Exploration and Production Sharing Agreement (“EPSA”) in Libya.

The agreement also involves Eni’s acquisition of the operatorship, currently held by BP, in the contractual areas A and B (onshore) as well as C (offshore) in Libya. In each block, BP holds a working interest of 85% of the second party share, with the Libyan Investment Authority holding the remaining 15%. The parties plan to restart exploration activities in the region in 2019. Therefore, they propose to finalize and complete all necessary agreements by the end of 2018.

The EPSA operations in Libya were suspended since 2014. The recent developments will create an attractive investment environment in the country, which will re-establish Libya’s production levels and reserve base by maximizing the use of existing infrastructure. This transaction will emphasize and support the existing strategic and privileged partnership between parties over the long term.

The development will boost exploration and development activities in the country as well as endorse Libya’s investment environment. The LOI also reinforces the parties’ commitment to participate in development through the execution of social impact projects.

Eni’s constant efforts to expand upstream operations will generate profitable growth in the long term. The company expects production growth of hydrocarbon through 2018 of 4%, primarily backed by ramped-up production from fields in Egypt, Indonesia and Kashagan. Moreover, start-up of new upstream projects in Ghana and Angola along with restart of Libya operations will continue to support the company’s oil production.

Price Performance

In the past year, Eni’s shares have increased 11.8% compared with the industry’s 11.3% rise.

Zacks Rank & Stocks to Consider

Eni currently carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Petroleo Brasileiro S.A. PBR or Petrobras SA and Range Resources Corporation RRC. All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.

Range Resources is an independent oil and gas company, engaged in the exploration, development and acquisition of oil and gas properties. The company delivered a positive earnings surprise of 74.2% in the last four quarters.

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