Special from Zacks Equity Research:
The Woodlands, Texas-based Anadarko Petroleum Corporation (NYSE: APC), yesterday, announced that it struck oil at its appraisal well in the Campos Basin offshore Brazil. Located in block BM-C-32, offshore Brazil, the Itaipu-2 appraisal well discovered a gross petroleum column of nearly 58 net feet in a pre-salt carbonate reservoir.
The well drilled to a total depth of 16,000 feet in 4,660 feet of water is an aggressive step-out from the first Itaipu discovery well, located 4 miles northwest.
The Itaipu-2 well established a fluid contact and appears to have successfully extended the accumulation 120 meters downdip from the discovery. Accordingly, the appraisal well significantly increases the extent of the vast Itaipu field. Summation of the data from both the wells is expected to increase the company’s previous resource estimates for the field. Going forward, Anadarko hopes to continue more activity on the block.
Anadarko is the owner of a 33.3% working interest in BM-C-32. Other operators on the block include BP Plc (NYSE: BP) with a 40% working interest and Maersk Oil with a 26.7% working interest. Earlier, when the discovery of Itaipu-1 was announced, Devon Energy Corporation (NYSE: DVN) also held interest in the block, which was later acquired by BP Plc.
Earlier this week, BP Plc announced having found traces of gas at its Itaipu-2 pre-salt appraisal well offshore Brazil. BP encountered elevated gas, gas wetness and fluorescence while drilling the well.
However, to validate the find, the company is conducting further logging operations that will have to be integrated into the overall interpretation. The company has reported to the Brazilian National Petroleum Agency about the potential discovery.
Separately, Anadarko also is currently drilling an appraisal of its post-salt Itauna discovery on block BM-C-29, and plans to spud the Wahoo-4 pre-salt appraisal well on block BM-C-30 nearing the end of 2011.
We believe Anadarko’s $4 billion settlement with BP for all current and future claims associated with the Deepwater Horizon accident has come as a relief for Anadarko. The uncertainty over its liability in the clean-up of the Macondo oil spill had to an extent limited the upside potential of the stock.
Anadarko presently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We maintain our long-term ‘Neutral’ rating on the stock.
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