ENI Eni Spa

Eni SpA agreed to sell a 30% stake in giant Egyptian gas field Zohr to PAO Rosneft for $1.58 billion, part of the Italian energy company's plans to raise cash to confront low oil prices.

Russia's Rosneft, which has an option to buy another 5% of the field under the same conditions, will pay $1.13 billion for its stake as well as an additional $450 million to cover development costs already incurred by Eni.

Eni has been among the most successful in the industry in recent years at finding new oil and gas fields and has often sold stakes early on to share development costs and raise funds. Including the sale to Rosneft, Eni has raised $6.3 billion in the past four years selling stakes in its recently discovered oil and gas fields. Last month, Eni sold a 10% stake in the same Egyptian gas field to BP PLC for $525 million.

The Italian company in March promised €7 billion ($7.42 billion) in asset sales by 2019 with most of that coming through divestments in oil and gas projects. Eni, which is 30%-owned by the Italian government, is planning to sell part of its holding in another large field off the coast of Mozambique that could raise several billion dollars.

Monday, Brent hit its highest level since July 2015 after non-OPEC oil-producing countries agreed over the weekend to reduce output, but at about $57 a barrel crude is still less than half of where it was 2½ years ago. In the wake of crude's fall to under $30 a barrel, Eni slashed its dividend and announced heavy cost cuts to accompany the asset sales.

While the most recent announced production cuts coupled with those pledged last month by producers in the Organization of the Petroleum Exporting Countries have been cheered by the markets, oil companies remain cautious because compliance among the cartel's members has often failed to live up to promises.

The Zohr field, discovered in mid-2015, is the largest ever gas find in the Mediterranean with 30 trillion cubic feet of gas. The first gas is expected to come to market at the end of next year.

If Rosneft and BP both exercise their options to buy additional 5% stakes in Zohr, Eni's holding will fall to 50%, a level it has said it won't breach.

Write to Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

December 12, 2016 07:25 ET (12:25 GMT)

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