Hess Corporation (HES) has entered into a joint venture agreement with Canadian explorer Niko Resources Ltd. for the development of an Indonesia project. The contract is pending approval from the Indonesian government and the companies did not disclose any financial terms.
The deal calls for both the parties to jointly develop the Kofiau Production Sharing Contract, off Indonesia. Per the agreement, Niko will enjoy the operatorship of Kofiau with a 57.5% stake, while Hess will hold the remaining 42.5% working interest.
Under the extensive drilling campaign in Indonesian deepwater, Niko is entitled to drill numerous wells across its acquired 2266 square kilometers of 3D seismic data and 1050 kilometers of 2D seismic data at Kofiau. Operation is set to commence in 2012. Notably, Niko also clinched yet another similar type of deal in Indonesia, with the Norway-based major international integrated oil and gas company, Statoil ASA (STO), affirming its keenness for field development in the region.
We believe that New York-based Hess is favorably positioned to benefit from an array of developments projects, commodity price leverage and improving fundamentals within the industry.
A ramp-up in activities at Bakken, Eagle Ford and Marcellus in the U.S. and the Paris Basin in France, accompanied by a rich portfolio of offshore drilling opportunities in the Gulf of Mexico, Brazil, West Africa and Egypt, will strengthen the company’s future production and drive its earnings, cash flow and valuation. Further, the latest oil discovery at the Paradise-1 deepwater exploration well offshore Ghana holds a lot of promise.
We are maintaining our long-term Neutral recommendation on the stock. Hess currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
