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BP Cuts Down Oil & Gas Exploration Operations off Nova Scotia

Zacks Equity Research
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BP plc BP is downsizing oil and gas exploration plans off Nova Scotia as it intends to return 50% of the area included in the license.

The total area of the license, that is a consolidation of four offshore parcels, is located about 300 kilometers southeast of Halifax. The move follows after the company failed to drill four wells within the first phase of its exploration license, which is mandatory for the approval of the second phase. BP has agreed to pay a deposit of $1 million to extend the first phase of its exploration license by one year. The company is required to apply for permission to drill a well during the extension period.

However, the board mentioned that if BP fails to drill a well during its extension period, the company will forfeit the deposit and either surrender the remaining area under its exploration license or make a $2-million deposit for another one-year extension.

Per BP spokeswoman, prior to progressing with a development plan, the company will continue to appraise data from its first exploration well in the area — the Aspy D-11 well. The well reached a total depth of 7,400 meters.

In November 2018, BP's partner in the Scotian Basin exploration drilling project, Hess Corporation HES, announced that its first well did not encounter commercial quantities of hydrocarbons. BP’s plan to downsize operations in Nova Scotia basin came just over a year after Royal Dutch Shell plc RDS.A stated to shut the second of two exploration wells due to unavailability of any commercial hydrocarbons.

BP won the right to explore offshore Nova Scotia in late 2012 after it submitted a $1 billion bid, the highest ever accepted for deepwater exploration rights in Atlantic Canada.

The Nova Scotia basin is estimated to hold a potential resource of 121 trillion cubic feet of gas and 8 billion barrels of oil.

In June 2018, BP leaked 136 cubic meters of synthetic drilling mud from the West Aquarius drilling unit, raising concern about offshore exploration in Nova Scotia.

The incident raised questions about the safety of the lands and waters, while others expressed anxiety about the potential impact on the province's prospective fishing industry.

Per an environmentalist, a major blow out or spill along the Scotian Shelf will be devastating and that all operations should be stopped. However, the board needs to take a quick decision with respect to further operations in the area.

Zacks Rank & Key Picks

Currently, BP carries a Zacks Rank #3 (Hold).

Another better-ranked player in the energy space is NextEra Energy Partners L.P. NEP, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Juno Beach, Florida, NextEra Energy Partners was formed by NextEra Energy, Inc. in 2014, to acquire, manage and own contracted clean energy projects with stable long-term cash flows. The partnership delivered average positive earnings surprise of 99.1% in the last four quarters.

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