Investors shouldn’t overlook BP PLC (LSE:BP.) Bumerangue discovery in Brazil, not according to analysts at Citi.
The American bank, in a note, commented that the market reaction to the Bumerangue result - described by BP as its best discovery ‘in decades’ – had been muted.
Citi noted the current market apathy with exploration success, saying perhaps that some investors have a singleminded view that oil companies should only return capital.
But Citi disagrees
Pointing out the positives, the bank’s analysts say Bumerangue has the potential to be a multi-billion barrel find. And, that the block has very generous fiscal terms.
Moreover, Citi points out that BP retains 100% of the discovery which, as analysts say, is almost unheard of in the industry presently.
And, if that’s not enough, there appears to be follow-on potential in adjacent acreage.
BP announced the Bumerangue discovery on Monday. An exploration well was drilled around 400 miles from Rio de Janeiro, in the Santos basin, in a water depth of 2,372 metres.
It was sunk to some 5,855 metres total depth, and penetrated a hydrocarbon column of around 500 metres. And, it has an estimated areal extent greater than 300 square kilometres.
Analysis of the discovery is continuing.
“This is another success in what has been an exceptional year so far for our exploration team, underscoring our commitment to growing our upstream,” said Gordon Birrell, BP EVP of Production & Operations.
He added: “Brazil is an important country for BP, and our ambition is to explore the potential of establishing a material and advantaged production hub in the country."