Exxon, OMV Set 2012 Drilling Goal

Zacks Equity Research

ExxonMobil Corporation’s (NYSE: XOM - News) joint venture with Romania’s largest oil company OMV Petrom SA will finally proceed with drilling operations in 2012. The drilling of the first deepwater well in Romania is pending since the rig has not yet been set up on location.

As per the concession agreement signed between the companies in July 2011, the joint venture was extended by five years for appraisal of the hydrocarbon potential of the deepwater section of the Romanian Neptun Block, in the Black Sea.

The joint venture has planned an outlay between $3–$10 billion for the expansion of crude production and growth in the Romanian offshore Neptun Bloc. The investment depends on the success of the drilling.

Petrom will control the preliminary work program while Exxon will provide the funding of the same. ExxonMobil’s vast experience will also come handy in evaluating deepwater seismic data.

ExxonMobil is also keen on exploring various sources of renewable energy. The Romanian economy will benefit from royalties and employment generation if crude is found.

ExxonMobil is the world’s largest publicly traded oil company. It is the best-run integrated energy firm in the world given its track record of superior return on capital employed. It has long been a core holding for investors seeking a defensive name with continued dividend growth.

We believe ExxonMobil’s growth will be fueled by 11 major upstream projects, which are scheduled to come online through 2013. Significant exploration successes in its wide ranging 2011 program, with key wells in the Gulf of Mexico, the Black Sea, Tanzania and Argentina, are thought to be major catalysts going forward.

ExxonMobil has a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the company. BP Plc (NYSE: BP - News) and ConocoPhillips (NYSE: COP - News) are major competitors of the company.

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