Eni SpA (E) joins with Venezuela’s state-owned oil firm PDVSA for a joint venture that will start producing heavy crude oil in the country’s Orinoco region. The joint venture is planning to start construction in 2011, with a commencement of production in 2014. The deal is subject to approval from the Board of Directors of both companies.
Under the terms of the agreement, PDVSA will control 60% of the joint venture, while Eni will have the other 40%. Initial production is expected to be around 75,000 barrels a day, but additional construction will allow the joint venture to increase its production up to 240,000 barrels a day. In the future, it may also build a refinery.
We like Eni’s recent strategy on its upstream growth trajectory. Apart from this joint venture, it has recently purchased a 50% interest and operatorship in blocks 1 and 3A in Uganda for a total cosideration of
$1.35 billion.
Eni’s near-term upstream production is bolstered by acquisitions with a strong strategic rationale. Further, we believe that one of the main features of Eni’s upstream portfolio is its lower reliance on a handful of large fields, both in its existing portfolio and its future growth pipeline.
Read the full analyst report on “E”
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