ConocoPhillips to Explore Offshore Bangladesh

ConocoPhillips (NYSE:COP) has recently announced that it has entered into a Production Sharing Contract (PSC) with the government of Bangladesh and the state-owned oil and gas company PetroBangla making it ConocoPhillips’ first investment in the region. ConocoPhillips holds 100% working interest in the PSC. ^[1] ConocoPhillips is the third largest oil producing company in the world and operates in all sectors of the oil and natural gas industry such as exploration and production, midstream, refining and marketing, and petrochemicals. It competes with ExxonMobil (NYSE:XOM), BP (NYSE:BP), Anadarko Petroleum (NYSE:APC) and Chevron (NYSE:CVX).

We have a price estimate of near $75 on ConocoPhillips’ stock which is just ahead of the current market price.

Contract Lies in Disputed Region

The contract awarded to ConocoPhillips lies in the disputed waters of Bay of Bengal, but ConocPhillips will only explore for oil and gas in the undisputed areas in block 10 and 11. The two blocks cover an area of 5,158 square kilometers and have a water depth of 1,000-1,500 meters. India and Myanmar also lay claims to this part of Bay of Bengal. The company is expected to invest about $111 million in its first round of exploration and may be able to conduct exploration in the remaining areas of the block depending on the solution of the dispute.

It is highly probable that ConocoPhillips will come up with positive exploration results especially since large reserves have been discovered in India and Myanmar’s portion of Bay of Bengal. ConocoPhillips’ natural gas sales volume was 1,620 billion cubic feet in 2010 which we expect to increase to 1,736 billion cubic feet by the end of our forecast.

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1. ConocoPhillips to explore offshore Bangladesh in the Bay of Bengal, News Release, ConocoPhillips [↩]