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I have discussed and recommended BP plc (NYSE:BP) in several of my earlier articles. In a most recent positive development for BP, the RIL (Reliance Industries Ltd.), BP and NIKO partnership announced a significant gas condensate discovery in deepwater KG D6 Block, offshore India. RIL is the operator of KG D6 with 60% equity. BP has a 30% share and NIKO the remaining 10%.

According to the press release by BP:

The KGD6-MJ1 well was drilled in a water depth of 1,024 metres - and to a total depth of 4,509 metres - to explore the prospectivity of a Mesozoic Synrift Clastic reservoir lying over 2,000 metres below the already producing reservoirs in the D1-D3 gas fields.

Formation evaluation indicates a gross gas and condensate column in the well of about 155 metres in the Mesozoic reservoirs. In the drill stem test, the well flowed 30.6 million standard cubic feet per day (mmscf/d) and liquid rate of 2,121 barrels a day with a choke of 36/64" with a flowing bottom hole pressure of 8,461 psia suggesting good flow potential. Well flow rates during such tests are limited by the rig and well test equipment configuration.

The discovery, named 'D-55', has been notified to the Government of India and the Management Committee of the block. This discovery is expected to add to the hydrocarbon resources in the KG D6 block. Appraisal will now commence to better define the scale and quality of the field.

BP had invested $7.2 billion in 2011 for a 30% stake in the joint venture. The discovery, probably one of the biggest in India, will ensure that the venture is profitable for BP in the long term. BP and RIL have already planned an investment of $5 billion in the KG D6 block in the Krishna-Godavari field over the next 5 years.

From an investment perspective, this is surely a positive development and should trigger some upside in the stock. More importantly, BP is getting positive results from its regional diversification of assets. Currently, BP is trading at an attractive PE of 6.13 along with a healthy dividend yield of 5%.

Investors can consider near-term exposure to the stock for trading gains as the positive impact of the news will be discounted by the stock in Monday's trading session. At the same time, long-term investors can gradually accumulate the energy giant.

I do expect a steep correction in equities over the next 3-6 months. Investors therefore need to go slow on the stock accumulation at this point of time. Any correction of 15-20% in the indices would be a good time to consider significant exposure to the stock. As mentioned earlier, BP can be a near-term trading stock as the market discounts the news in the stock price.

Source: Significant Gas Discovery Can Trigger Upside For BP