Italy's biggest oil and gas company Eni SpA E) has resumed its drilling operations in Libya with the spudding of the AI - 108/4 well in the Sirte Basin.
The well is located about 300 kilometers south of the city of Benghai and is expected to reach a total depth of 14,500 feet. Operated by the fully owned subsidiary Eni North Africa, the well is expected to test a new geological play in the EPSA IV 20088 Contract Area A.
In Libya, Eni retains operatorship of Area A with a stake of 50%. It also holds a 50% interest in Area B and Area F. Another one-third stake is held by Eni in Area E, which includes the high-profile Elephant field.
Commencement of drilling of AI - 108/4 represents a vital step in the continuation of Eni's upstream operations in Libya and signifies the first of an onshore drilling program. It is likely to continue through 2013.
Eni's output in North Africa signifies about a third of its total oil and gas production and was the first international company to restart operations in September 2011, through the Mellitah Oil & Gas joint venture in the Abu Attifel field.
The Milanese explorer was also the first to abandon the force majeur status in Libya, in December 2011. In February 2012, the company restarted offshore exploration activities by acquiring a 3D seismic survey.
Eni has oil and gas contracts in Libya that will be effective till 2042 and 2047, respectively. Currently, Eni's yield in the region accounts for about 240,000 barrels of oil equivalent per day. The company has delayed its schedule for restoring pre-war production to 2013 from year-end 2012.
Eni, which recently received regulatory approval for the Goliat oilfield in the Barents Sea, in partnership with Statoil ASA (STO), holds a Zacks #3 Rank that is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.