Eni, Total & Novatek Receive Two Blocks Offshore Lebanon

For the first time, the Lebanese government has awarded two offshore exploration and production licenses to a group comprising Total SA (NYSE:TOT) , Eni SpA (NYSE:E) and Novatek PJSC.

Currently, the government is drafting a bill on onshore energy rights as parliamentarians attempt outlining a law overriding Lebanon’s first sovereign wealth fund.

After much delay, the deadline set for prequalified companies to submit bids on the open blocks in the country’s first offshore licensing round concluded on October 12.

Two licenses were awarded by the cabinet for the joint exploration of blocks 4 and 9. A month’s period has been allocated to the group — comprising Total, Eni and Novatek — to organize legal, administrative and technical paperwork prior to signing production-sharing contracts with the government in January. Drilling operations are likely to commence in 2019.

No bids were received for the remaining three offshore blocks. Since 2013, the licensing round has encountered hindrances like political clashes over block delineation and government paralysis. The obstacles have caused Lebanon to trail Cyprus, Egypt and Israel in exploration activities in the Eastern Mediterranean. In 2017, bidding was deferred to provide companies time to comprehend a new tax law.

Per the Lebanese Petroleum Administration (LPA), the exploration phase will begin after the signing of the EPA and will last up to five years with the possibility of a year-long extension. The ultimate goal of the exploration phase is to strike a commercial discovery.

In a bid to reduce public debt amounting to 150% of its GDP, Lebanon is trying to initiate oil and gas exploration at the earliest. The government will gain from royalties, taxes and share of production, in the range of 65-71% in block 4 and 55-63% in block 9.

According to the seismic surveys carried out in 2013, Lebanon is estimated to hold about 96 trillion cubic feet of gas and 850 million barrels of oil.

Price Performance

Shares of Eni have gained 32.67% in the last three months. Total’s shares have returned 54.37% in the same time frame.

Zacks Rank & Key Picks

Eni and Total carry a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector are SunCoke Energy Inc (NYSE:SXC) and Northern Oil and Gas Inc (NYSE:NOG) . The stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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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