(COP) ConocoPhillips to Enter Bangladesh

ConocoPhillips (COP) inked a production sharing contract (PSC) with the Bangladesh government and state-run Petrobangla to explore hydrocarbon in the virtually untapped deep waters of the Bay of Bengal.

The company did not disclose any financial details of the agreement.

The deal entitles the U.S. integrated giant to explore two blocks, DS-08-10 and DS-08-11, of which ConocoPhillips holds full 100% working interest. The blocks cover a total area of 5158 square kilometers (1.27 million acres) and are located 1000–1500 meters (3,300–5,000 feet) under water. The awarded acreages are located about 280 kilometers (175 miles) from the port city of Chittagong.

ConocoPhillips said that the deepwater area of Bangladesh remains almost unexplored and aims to initiate the exploration attempts as soon as it receives necessary survey reports. Bangladesh has proven reserves of 7.3 trillion cubic feet (Tcf) of gas and probable reserves of 5.5 Tcf. The country currently consumes over 2,500 million cubic feet (MMcf) of gas per day, against its production of approximately 2,000 MMcf per day.

The contract also enables ConocoPhillips to export 80% of gas, with Petrobangla having the permit for the balance.

Houston, Texas-based ConocoPhillips is a major globally integrated oil company engaged in the exploration and production of oil and natural gas, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.

With leading positions in both natural gas and heavy crude oil in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions, we believe ConocoPhillips will be able to replace reserves and sustain production growth over the long term.

However, despite these positive factors, the company’s performance could be weighed down by unpredictable global economic conditions and uncertain oil and natural gas prices. Therefore, we prefer to maintain our long-term Neutral recommendation for the company.

ConocoPhillips, which competes with Marathon Oil Corporation (MRO) and Hess Corporation (HES), currently retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.

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