Zacks_Analysts' Blog : Conoco Strikes North Sea Gas - Analyst Blog

ConocoPhillips (COP) announced the discovery of gas at the Peking Duck prospect in the southern North Sea off Norway. However, the company did not reveal the estimated amount of gas found.

In its first drilling on the block, ConocoPhillips’ 7/11-12 S wildcat hit a 40-metre gas column in a Jurassic reservoir in the Ula formation. The reservoir quality in Triassic rocks was substandard than expected. The other wildcat 7/11-12 A sidetrack struck a 34-metre gas column in the same structure.

Located in water depth of 236.2 feet, both discoveries were drilled by the rig Maersk Gallant. Further evaluation and appraisal will conclude the actual size of the field.

ConocoPhillips controls a 22% operating interest in the license, while partners OMV, Dong and Talisman Energy (TLM) hold a respective 30%, 28% and 20% stake.

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, ConocoPhillips expects to replace reserves and sustain production growth over the long term.

We appreciate ConocoPhillips’ emphasis on creating shareholder value through operational excellence, strong project execution, dividend payout and utilization of its excess cash flow to repurchase shares. Furthermore, strong proceeds from asset sales, disposal of low-profit generating properties and cancellation of potentially less profitable projects add to the company’s drive to sustain its growth trajectory.

Despite these positive factors, the company’s performances are expected to be weighed down by unpredictable global economic conditions and uncertain oil & natural gas prices. We also remain cautious about the geopolitical risks associated with international activates and operational challenges.

We believe there are limited positive catalysts for ConocoPhillips and expect it to perform in line with the broader market. Hence, we maintain a Neutral rating on the stock for the long term.