ConocoPhillips (COP) To Focus On Magallanes With ENAP

ConocoPhillips (NYSE:COP) has entered into an agreement with state-run Chilean firm Empresa Nacional del Petroleo OR ENAP to jointly explore and exploit oil and gas deposits in the Magallanes region. As reported by Reuters, per the agreement, ConocoPhillips will hold a stake of 49% in all the fields discovered in the region. ENAP will hold the majority stake of 51%.

ConocoPhillips plans to invest in the range of $70 million to $100 million in Chile. However, the actual amount will depend on the results of exploration in that region over the next four years. ConocoPhillips has been active with ENAP in the Magallanes region since Aug 2014. The duo has been focusing on conducting geographical and geological studies in the region.

The focus on Chile underlines the company’s aim of replacing reserves and sustaining production growth over the long term. Despite cuts in capital spending, ConocoPhillips expects major capital projects to be brought online in 2016. Surmount 2 and APLNG as well as a further ramp up of Foster Creek/Christina Lake is expected to facilitate production growth by 1% in 2016. The company also expects to lower operating expenses during this period.

Further, ConocoPhillips is poised to benefit from a pipeline of projects in the Gulf of Mexico, Malaysia, the liquefied natural gas project in Australia, the U.K., Norway, and the Canadian oil sands, as well as the U.S. Lower 48 liquids-rich plays. Oil sands expansion projects are on track. Last September, Foster Creek Phase F and the Britannia Long-Term Compression Project reported first yield, while the Gumusut floating production system achieved first production in October. These ramp-up activities are expected to fuel ConocoPhillips’ long-term production growth.

Currently, ConocoPhillips – the largest U.S. independent oil company – carries a Zacks Rank #3 (Hold). Some better-ranked players from the same space are CVR Refining, LP (NYSE:CVRR) , Braskem S.A. (NYSE:BAK) and North Atlantic Drilling Limited (NYSE:NADL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).