Eni (E) to Sell 25.5% Stake in Block A5-A to Qatar Petroleum

Eni SpA E continues to strengthen its partnership with Qatar Petroleum, as is evident from its recent decision to farm out a participating interest of 25.5% in block A5-A, offshore Mozambique, to thelatter. The deal value is not yet revealed by either party.

Located in the deep waters of the Northern Zambezi Basin, Block A5-A lies about 1,500 kilometers north-east of the capital Maputo and adjacent to block A5B. In December 2018,an affiliate of Qatar Petroleum inked an agreement with an ExxonMobil Corporation XOM affiliate to purchase a participating interest of 10%.

Spread across an area of 5,133 square kilometers in a water depth within 300-1,800 meters, the block is situated in a completely unexplored zone in front of the town of Angoche.

The block was awarded to Eni following the 5th competitive Licensing Round initiated by the Republic of Mozambique in 2015. However, negotiations with the government took more than two years and Eni officially received the block in October 2018.

The transaction is subject to approval by the Mozambican authorities.Eni, the operator of Block A5-A consortium, has a participating share of 59.5% that is owned through its subsidiary Eni Mozambico. Subsequent to the sale of its stake, Eni’s holding in the block would reduce to 34%. Other partners are Sasol and the Mozambican state company Empresa Nacional de Hidrocarbonetos (ENH), holding respective stakes of 25.5% and 15%.

Eni’s presence in Mozambique dates back to 2006, when the company acquired the Petroleum Contract Area 4, in the offshore Rovuma basin, in the north of the country. Total gas in place in the area is estimated in excess of 85 trillion cubic feet (TCF), following a very successful exploration campaign, with the discoveries of Coral, Mamba and Agulha.

Initial development program of Coral incorporates the construction of a floating plant (FLNG) to process, liquefy, store and offload LNG. The plant, whose construction commenced in June 2017, will have a liquefaction capacity of about 3.4 million tons per year. Coral is projected to be commissioned in 2022.

The development program consists of the construction of an onshore plant, which is composed of two trains for gas treatment and liquefaction, with a liquefaction capacity of 15.2 million tons per year. This represents the first phase of the Rovuma LNG project. The project is anticipated to be sanctioned in 2019, while production is estimated to begin in 2024.

Eni and Qatar Petroleum are already partners in Oman and Mexico.

Zacks Rank & Key Picks

Eni currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector can opt for some better-ranked stocks as given below.

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SEACOR Holdings, Inc. CKH is a diversified holding company, mainly focused on domestic and international transportation, logistics, as well as risk management consultancy. The company delivered average positive earnings surprise of 49.6% in the trailing four quarters. The stock currently has a Zacks Rank #2 (Buy).

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