Eni Raises Yield Estimate On Successful Tecoalli 2 Drilling

Eni SpA’s (NYSE:E) successful drilling of the Tecoalli 2 well in Contractual Area 1 offshore Mexico encouraged the company to raise hydrocarbon yield estimate to 2 billion barrels from 1.4 billion barrels. This comprises about 90% oil while the rest is associated gas. The modification of the reservoir models of the Amoca and Miztón also contributed to the increase of estimate.

The Tecoalli 2 well, located in the shallow waters of the Campeche Bay, lies about 200 kilometers west of Ciudad del Carmen, in water depth of 33 meters. The field is situated 24 kilometers from the Amoca field and 13 kilometers from the Miztón field.

The well was drilled to reach a final depth of 4420 meters and struck about 40 meters of net oil pay in the Orca formation, featuring sandstone reservoirs of exceptional quality.

Subsequently, the well was extended to the Cinco Presidentes formation exploratory target, discovering further net oil pay of 27 meters. A production test will be carried out, following which, the well will be temporarily abandoned.

Eni proposes to submit the Development Plan (PoD) for Area 1 to Comisión Nacional de Hidrocarburos (CNH). Upon approval of the PoD, Eni will endorse the development. Consequently, production is anticipated to commence in first half 2019.

Eni’s presence in Mexico dates back to 2006. The company’s wholly-owned subsidiary — Eni Mexico S. de R.L. de C.V. — was established in 2015. Eni has holdings in four exploration and production blocks, as operator, in the Sureste Basin. Area 1, wherein Eni has a holding of 100%, was obtained in 2015 along with the Ronda 1-Licitación 2. In 2017, Eni obtained the other three blocks — Block 7, Block 10, Block 14 — where Eni holds 45%, 100% and 60%, respectively.

Moreover, Eni’s upstream operations in other regions including Cyprus, Egypt, Vietnam, Indonesia, Pakistan and Kenya are expected to generate profits in the future. Moreover, start-up of new upstream projects in Ghana, Angola and Indonesia will continue to support the company’s oil production.

Price Performance

Shares of the company have gained 2.1% compared with the industry’s rally of 6.8% in the last three months.

Zacks Rank & Key Picks

Eni carries a Zacks Rank 3 (Hold). A few better-ranked players in the energy sector include Holly Energy Partners, LP (NYSE:E) , SunCoke Energy Inc (NYSE:SXC) and Northern Oil and Gas Inc (NYSE:NOG) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Holly Energy Partners, owner and operator of refined product pipelines and terminals, delivered an average positive earnings surprise of 57.14% in the preceding quarter.

SunCoke Energy produces metallurgical coke in the United States. The company delivered an average positive earnings surprise of 113.52% in the last four quarters.

Northern Oil and Gas, based in Minnetonka, MN, is an independent energy company. The company delivered an average positive earnings surprise of 175.00% in the last four quarters.

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