Eni SpA (E) and Repsol YPF SA have signed strategic agreements with Venezuela's state-run energy company Petroleos de Venezuela S.A. or PDVSA for the commercial development of the vast hydrocarbons reserves at the Perla field.
The first agreement is a Memorandum of Understanding for the creation of a company which will develop and produce Perla’s condensate reserves. The new company will be jointly run by CVP (PDVSA’s affiliate) which would hold a 60% stake while both Eni and Repsol would hold 20% each. Currently, the condensate reserves are the property of the Republic of Venezuela.
The second agreement is a Term Sheet which establishes the key elements for up to a $1 billion investment structure to finance PDVSA’s (:CVP) share in the Perla development. Eni and Repsol will contribute with up to $500 million each. Both agreements are subject to final contracts yet to be signed and approval of local authorities.
Located in the Cardon IV block in the Gulf of Venezuela, the Perla field – Venezuela’s largest gas discovery – is estimated to contain approximately 17 trillion cubic feet (Tcf) or 3.1 billion barrels of oil equivalent.
The Cardon IV block is licensed and operated by the Joint Operating Company "Cardon IV S.A.", equally owned by Eni and Repsol. As part of the Gas Sales Agreement, PDVSA will participate with a 35% stake in the consortium during the development phase. This implies that Eni and Repsol’s holding will get reduced to 32.5% each. Perla production start up is expected by the end of 2014. The massive size of the field holds immense potential for development of natural gas exports.
Eni, with its consolidated subsidiaries, is engaged in oil and gas, electricity generation, petrochemicals, oilfield services and engineering industries. The company’s major business segments are Exploration and Production, Gas and Power as well as Refining and Marketing. The company conducts its major exploration and production activities for hydrocarbons.
Eni carries a Zacks Rank #5 (Strong Sell). Some better-ranked oil and gas stocks that look promising include Encana Corp (ECA), CVR Refining, LP (CVRR) and Matrix Service Company (MTRX). All these stocks sport a Zacks Rank #1 (Strong Buy).