Italian operator, Eni SpA (E), has engaged Ensco 107 jackup to carry out drilling at the Cua Lo prospect on Block 105-110/04 in the Song Hong basin shelf, offshore Vietnam and west-southwest of China's Hainan Island.
Drilling of the Block 105-110/04 well is likely to commence by Jun 2013, subject to the release of the rig by the previous operator, Mitra Energy Ltd.
According to the terms of the farm-out agreement entered with Eni in early 2013 with respect to Block 105 and 120, joint venture partner Neon Energy will be carried through the drilling of the Cua Lo well up to a gross cost of $25 million.
Per the deal, Eni agreed to pay the cost of gathering 800 square kilometers of 3D seismic in Block 105 and the cost of a 250 square kilometer shoot over Block 120, as well as the drilling of one exploration well in each block, in return for a 50% interest in the blocks. Eni, the operator of the block, has a 50% working interest, while KrisEnergy Ltd. and Neon Energy have a stake of 25% each. Any expense beyond the cost cap will be shared by the partners in accordance with their respective working interests.
The final location of the well will be ascertained on the outcome of the analysis and interpretation presently being carried out on 3D seismic data covering the Cua Lo prospect.
In 2011, an independent report by Netherland Sewell & Associates Incorporated (NASI) allocated the Cua Lo prospect a best estimate gross unrisked prospective recoverable resource of 3.9 trillion cubic feet of gas to 13.9 TCF gas (high estimate).
The seismic data reveals features generally known as Direct Hydrocarbon Indicators, which often signals the presence of hydrocarbons. The latest 3D seismic data will validate the prospect of the acreage and aid in locating the well to optimally target multiple potential pay zones in an area that promises reservoir development.
Eni holds a Zacks Rank #4 (Sell). However, there are other stocks in the oil and gas industry like Dawson Geophysical Company (DWSN), SM Energy Company (SM) and Exterran Holdings, Inc. (EXH) that appear more attractive in the short term. All three stocks carry a Zacks Rank #1 (Strong Buy).
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