ConocoPhillips (COP) is becoming increasingly focused on its discovery in the Browse basin off Western Australia as it seeks new reserves to feed its Darwin liquefied natural gas (LNG) plant.
The company exercises its option to buy an additional 9% stake in exploration permits WA-314-P and WA-315-P in the Browse basin. Following the transaction, ConocoPhillips will own a 60% stake in WA-314-P, WA-315-P and WA-398-P, while joint venture partner Karoon Gas will have the remaining 40% interest.
The recent Poseidon-1 gas discovery is quite prominent with multi-trillion cubic feet potential. Conoco intends to appraise this discovery sometime soon, as and when it gets more information and more comfortable speculating on both the commercial metrics and ultimate size.
ConocoPhillips has added a number of high-impact projects in the LNG area and achieved exploration successes in the offshore China, Vietnam and Gulf of Mexico regions. The company anticipates strong growth in the Asia-Pacific, Russia and Caspian, and the Middle East regions to offset natural declines in its North American and North Sea assets.
ConocoPhillips’ creation of an Australasian natural gas business is expected to cement the company’s competitive position in the rapidly growing LNG market. However, our Neutral recommendation for the stock reflects the company’s unfavorable cost and return-on-capital-employed scenario that lags its super major peers.
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