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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharat Petroleum Corporation (BPCL IN, INR 685, Buy)
We hosted a conference call with Anadarko Petroleum Corp today to get latest update on the company’s Mozambique and Brazilian assets (BPCL has stakes of 10.0-12.5% in these blocks). Anadarko management’s confident tone reiterates our positive stance on the exploration upsides from Mozambique. With rise in exploration activity in 2012, we expect more news flow related to higher reserves. As we move towards FID in late 2013 (reserve certification, gas price contracts, government approvals), uncertainties on the operational front will diminish. We maintain ‘BUY’ on BPCL with TP of INR843/share valuing upstream at INR166/share (bull case at INR389/share).
Reiterates upside potential to Mozambique reserves
Anadarko reiterated reserves estimates of 17-30+ tcf with substantial upside potential given that a large part of the block is yet to be explored. Exploration activity will increase as drilling moves to the block’s northern part where the company plans to drill two exploration wells - Golfinho and Atum (refer map on next page). Post this, it plans to drill the southern areas of Black Pearl and Barracuda, estimated to hold oil reserves. Recently conducted DST test confirmed the high reservoir quality and continuity of gas as far as 3 km away.
High quality reservoir making it ideal for liquefaction
Anadarko is confident of its ability to handle the reservoir given its more than 15 years of upstream experience and the fact that the reservoir has continuous sand bodies with good rock quality, implying the engineering design can be directly taken off the shelf. It is a non-HPHT reservoir with no H2S or CO2 presence and high methane content. The Final Investment Decision (FID) is expected by late 2013 post: (a) certification of reserves, (b) acreage position in place, (c) engineering plans, (d) government approvals, and (e) finalization of gas contracts. It estimates a total capex of USD14-16 bn and plans to set up the first LNG train (5 mtpa) by 2018 and second by 2019. The company expects 75-85% of the sales to be priced on a crude equivalent basis and pricing could be similar to recent contracts. Long-term upsides are expected from drilling in southern area for crude oil.
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