BP plc BP, the British oil and gas giant, has inked an agreement with Iraq for the redevelopment of four oilfields in Kirkuk. This is a significant development for Iraq, given that its oil and gas output has been restrained for several years due to challenges like war, corruption and sectarian conflicts.

Investment and Scope of the Project

BP mentioned that the estimated investment over the project’s lifespan may add up to $25 billion. According to the terms of the agreement, BP will be working with North Oil Co., North Gas Co.and a new undisclosed operator to optimize the production from these fields. The agreement, however, has not been finalized and is subject to approval by Iraq’s government.

Per the terms, the project involves a drilling schedule and the construction of new facilities, including gas expansion projects. This should help boost the country’s oil and gas output and contribute to meeting the domestic demand. Additionally, the agreement outlines revamping the existing wells and other infrastructures to stabilize production.

BP's Benefits and Compensation

BP stands to benefit from the redevelopment of these four oilfields in Iraq. The company’s compensation shall be determined partially by the increased volumes and the commodity pricing environment. Furthermore, BP will be able to secure a share of production and reserves from the Kirkuk fields, proportional to the fees it receives for raising output levels.

Planned Increase in Production

A senior official from Iraq noted that the British energy giant plans to increase the production capacity at the four oilfields by 150,000 barrels per day (bpd). This is anticipated to raise the total production capacity of the Kirkuk fields to nearly 450,000 bpd within 2-3 years.

The deal was signed shortly after the company announced that it would reduce its renewable targets and focus on its traditional oil and gas business. During the signing, BP and Iraq agreed upon the technical terms and contractual obligations, including the financial and economic structure of the project.

BP's Presence in Iraq

BP has a long-standing relationship with the Kirkuk oilfields as it was part of the consortium that discovered oil in the region in the 1920s. The company believes that Kirkuk has significant potential and expects the field to contain nearly 9 billion barrels of recoverable oil.

In addition, BP is a 50% stakeholder in the joint venture that operates the Rumaila oilfield in southern Iraq. The British energy major has been operating in this region for nearly 100 years now.

Per Reuters, the deal with Iraq is aimed at boosting the country’s oil and natural gas output by upgrading the infrastructure at these four oilfields in Kirkuk.

BP’s Zacks Rank and Key Picks

BP currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the energy sector are Matador Resources Corporation MTDR, Equinor ASA EQNR and Archrock Inc. AROC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Matador Resources is a leading U.S.-based exploration and production firm. The company has consistently exceeded production expectations, demonstrating operational efficiency and robust growth. MTDR’s production efficiency, combined with the favorable oil price environment, is expected to positively impact its bottom line.

Equinor ASA is one of the leading integrated energy companies globally and the second-largest supplier of natural gas in Europe. The company’s expansion in the renewable energy space positions it for long-term growth as more and more countries transition toward cleaner energy solutions to meet their climate goals. Its strategic pivot toward low-carbon energy solutions unlocks new revenue streams in the growing market for clean energy and carbon management solutions.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

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