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Equinor (EQNR) & Partners Discover New Oil in Barents Sea

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·3 min read
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Equinor ASA EQNR recently announced the discovery of oil in the Barents Sea. Exploration well 7220/7-4, located in production license 532, has proven to have significant hydrocarbons depository. The license 532 was awarded in 2009 in the 20th licensing round. Notably, 7220/7-4 well is the 11th one in this production license and the first of the four wells planned for 2021.

Recoverable resources of 5-8 million standard cubic meters of oil have been estimated at the discovery site. In other words, it has a recoverable resource of 31-50 million barrels of oil. The exploration well was drilled around 10 kilometers southwest of the 7220/8-1 well in the Johan Castberg field to a depth of 2080 metres below sea. Equinor has Petoro and Eni S.p.A.’s E affiliate VårEnergi as partners at the license.

The company encountered 109 meters of oil from the Sto and Nordmela formations. Oil was struck at a depth of 1,788 meters below sea, with no gas cap in the well. This discovery is expected to be connected to Johan Castberg field through planned infrastructure at a future date, which will boost the value of the field. The exploration well was plugged and abandoned by the company.

Equinor used the Transocean Enabler drilling rig of Transocean Ltd. RIG at the 7220/7-4 exploration well. The rig is now expected to return at the Johan Castberg field and continue operations. Notably, the field will likely come online in 2023. It is expected to produce hydrocarbons for 30 years. Equinor reduced the Johan Castberg field development cost by 50% to NOK 50 billion. It has an estimated proven volume of 400-650 million barrels of oil.

Markedly, the company made 16 commercial oil and gas discoveries in 2019 and 2020 each. Some of the notable discoveries were made at the U.S. Offshore Gulf of Mexico and Brazil’s Santos basin. The company foresees expenditure for exploration activities through 2021 of $900 million. All the discoveries are likely to help Equinor reach a compound annual oil-equivalent production growth rate of 3% from 2020 through 2026. Notably, even though it is divesting its entire Bakken acreage to a private entity for $900 million, production for 2021 is expected to rise 2% from the 2020 level.

Price Performance

Shares of the company have gained 64.9%, outperforming the industry’s 27.7% rally in the past year.

Zacks Rank & Another Stock to Consider

Equinor currently has a Zacks Rank #2 (Buy). Another top-ranked player in the energy space is EOG Resources, Inc. EOG, holding a Zacks Rank #2. EOG Resources’ bottom line for 2021 is expected to increase 205.5% year over year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Transocean Ltd. (RIG) : Free Stock Analysis Report

EOG Resources, Inc. (EOG) : Free Stock Analysis Report

Eni SpA (E) : Free Stock Analysis Report

Equinor ASA (EQNR) : Free Stock Analysis Report

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