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Bharat Petroleum (BPCL)
Energy
E&P to hedge R&M. We are encouraged by the announcement of potential gas
resources of over 10 tcf in Area 1, Mozambique, wherein BPCL holds a 10% stake. We
highlight that Anadarko (operator of the block) is contemplating an option of two 5
mtpa trains for the LNG project to commercialize the gas discoveries. We believe
visibility on the development of BPCL’s E&P discoveries will likely boost sentiment for
the stock which has been muted on account of a lack of clarity on the subsidy-sharing
arrangement. We maintain our ADD rating on the stock with a target price of `780; we
do not ascribe any value to BPCL’s E&P portfolio at the current juncture
Contiguity of discoveries indicates more than 10 tcf of resource potential
An Anadarko-led consortium with BPCL as a 10% partner has announced a new gas discovery
(Camarao) in Area 1, which has more than 380 feet of net gas pay, including 140 feet of net gas
pay in shallower Miocene and Oligocene sand packages which was not encountered in the
previous wells. Anadarko has also confirmed the static pressure connectivity of Camarao discovery
with Windjammer and Lagosta discoveries. We note that the Camarao well is (1) 5 miles south of
the Windjammer discovery having more than 555 feet of net gas pay and (2) 10 miles north of the
Lagosta discovery having more than 550 feet of net gas pay (see Exhibit 1). The operator has
indicated a recoverable resource potential of more than 10 tcf of natural gas in the Windjammer,
Barquentine, Lagosta and Camarao complex.
10 mtpa LNG project to commercialize gas discoveries
We are encouraged by Anadarko’s recent press release, which highlights the possibility of building
two 5 mtpa trains for the proposed LNG terminal to commercialize the gas discoveries. We note
that LNG is the only viable option to evacuate the gas given (1) low demand potential in
Mozambique and (2) limited infrastructure to evacuate gas to South Africa. However, resource
potential of over 10 tcf from the block would make LNG a viable option. Anadarko expects to
commence gas production from Area 1 in Mozambique by CY2018 and plans to move second
drillship to Rovuma basin to drill seven exploration/appraisal wells over the next 12 months.
BPCL’s E&P portfolio could be meaningful
Exhibit 2 details the discoveries in BPCL’s E&P assets. Preliminary estimates put gross resource
potential of over 300 mn bbls of oil in BM-C-30 block in the Campos basin in Brazil (BPCL’s stake:
12.5%) and over 10 tcf of gas in Area 1 in the Rovuma basin in Mozambique (BPCL’s stake: 10%).
We would await development plans before ascribing any value to BPCL’s E&P assets. However, the
value of the E&P portfolio could be meaningful in the context of BPCL’s current market
capitalization of US$4.9 bn. We note that BPCL has also reported new oil and gas discoveries at
(1) Nunukan PSC in Indonesia and (2) BM-SEAL-11 block in Brazil, over the past year.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Petroleum (BPCL)
Energy
E&P to hedge R&M. We are encouraged by the announcement of potential gas
resources of over 10 tcf in Area 1, Mozambique, wherein BPCL holds a 10% stake. We
highlight that Anadarko (operator of the block) is contemplating an option of two 5
mtpa trains for the LNG project to commercialize the gas discoveries. We believe
visibility on the development of BPCL’s E&P discoveries will likely boost sentiment for
the stock which has been muted on account of a lack of clarity on the subsidy-sharing
arrangement. We maintain our ADD rating on the stock with a target price of `780; we
do not ascribe any value to BPCL’s E&P portfolio at the current juncture
Contiguity of discoveries indicates more than 10 tcf of resource potential
An Anadarko-led consortium with BPCL as a 10% partner has announced a new gas discovery
(Camarao) in Area 1, which has more than 380 feet of net gas pay, including 140 feet of net gas
pay in shallower Miocene and Oligocene sand packages which was not encountered in the
previous wells. Anadarko has also confirmed the static pressure connectivity of Camarao discovery
with Windjammer and Lagosta discoveries. We note that the Camarao well is (1) 5 miles south of
the Windjammer discovery having more than 555 feet of net gas pay and (2) 10 miles north of the
Lagosta discovery having more than 550 feet of net gas pay (see Exhibit 1). The operator has
indicated a recoverable resource potential of more than 10 tcf of natural gas in the Windjammer,
Barquentine, Lagosta and Camarao complex.
10 mtpa LNG project to commercialize gas discoveries
We are encouraged by Anadarko’s recent press release, which highlights the possibility of building
two 5 mtpa trains for the proposed LNG terminal to commercialize the gas discoveries. We note
that LNG is the only viable option to evacuate the gas given (1) low demand potential in
Mozambique and (2) limited infrastructure to evacuate gas to South Africa. However, resource
potential of over 10 tcf from the block would make LNG a viable option. Anadarko expects to
commence gas production from Area 1 in Mozambique by CY2018 and plans to move second
drillship to Rovuma basin to drill seven exploration/appraisal wells over the next 12 months.
BPCL’s E&P portfolio could be meaningful
Exhibit 2 details the discoveries in BPCL’s E&P assets. Preliminary estimates put gross resource
potential of over 300 mn bbls of oil in BM-C-30 block in the Campos basin in Brazil (BPCL’s stake:
12.5%) and over 10 tcf of gas in Area 1 in the Rovuma basin in Mozambique (BPCL’s stake: 10%).
We would await development plans before ascribing any value to BPCL’s E&P assets. However, the
value of the E&P portfolio could be meaningful in the context of BPCL’s current market
capitalization of US$4.9 bn. We note that BPCL has also reported new oil and gas discoveries at
(1) Nunukan PSC in Indonesia and (2) BM-SEAL-11 block in Brazil, over the past year.
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