Eni: African Ventures Gleam - Analyst Blog

Eni SpA (E), Italy’s oil major, together with its associates declared a successful oil discovery in the Cabaca South East-2 well in block 15/06, located offshore Angola. The well produced 7,000 barrels per day during the initial test run, which was limited by surface facilities.

Early July, Eni had announced the discovery, which is located at a distance of 100 kilometers from the coast and at a depth of 470 meters. The company initially estimated that the reservoir holds a total of 450 meters of thick gross oil. However, appraisal wells, after evaluations, have increased the amount by 30%.

Eni has the operatorship in the block with a 35% working interest. Other notable partners are Total SA (TOT) and Petrobras (PBR). The company has its presence in the country since 1980 with a current production of nearly 130,000 barrels of oil equivalent per day.

Eni has been showing encouraging signs of improvement in the exploration and production (E&P) space. Its international expansions are noteworthy, especially in Africa. Last month, Eni acquired a stake in the Ndunda Block, Democratic Republic of Congo, from U.K. based Surestream Petroleum. This was marked as the company’s first step into the country.

Eni’s strong presence in Africa and the Middle East is likely to result in growth. Moreover, additional production is expected from acquired properties in the Gulf of Mexico and Congo as well as from the expected build-up of gas production in Libya. However, pursuing upstream ventures in riskier regions could weigh on the stock as Eni is largely dependent on the results of its E&P segment. Our short-term rating for Eni is Sell (the Zacks #4 Rank) while the long-term rating is Neutral.