Italian energy company, Eni SpA (E) has reached an agreement with French power group GDF Suez to acquire a 10.4% stake in Elgin-Franklin gas condensates fields for EUR 590 million (US$804.5 million).
The two fields –– Elgin and Franklin –– is operated by the French oil company Total SA (TOT) with a 46.2% share and has a daily production potential of 175,000 barrels of condensate and 15.5 million cubic meters of gas at its peak level. Located in the Central Graben area of the U.K. North Sea about 149 miles (240 kilometers) east of Aberdeen, the fields also contributed 5.5 million barrels of oil equivalent to GDF Suez’s production last year.
The latest acquisition entitles Eni to 10.4% indirect participation in the fields apart from the 21.87% stake it already holds in the project. GDF Suez holds its share in Elgin-Franklin through a 22.5% shareholding in EFOG, a joint venture with Total.
The transaction is subject to certain closing conditions and is expected to be completed by year-end 2011. Eni already enjoys large scale hydrocarbon operations in the U.K. North Sea for years. The latest acquisition will widen its footprint in the region and provide short and long-term production gains from assets vital to the company’s portfolio.
The company mainly remains operational in the British section of the North Sea, the Irish Sea and certain areas East and West of the Shetland Islands over a developed and undeveloped acreage stretching across 3,592 square kilometers (1,151 square kilometers).
Although we remain skeptical about a certain degree of ambiguity looming with respect to macroeconomic factors like the political unrest in Libya for the rest of the year, Eni expects the decline in volumes of oil and natural gas in Libya to be partially offset by better production performance of its assets located in other parts of the globe. Therefore, we expect the company to perform in line with its peers and the industry as a whole and rate the stock Neutral.
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