U.S. super major ExxonMobil Corporation (XOM) recently contracted Norwegian oilfield services firm Aker Solutions for the supply of subsea umbilicals for the Erha North phase two development in Nigeria. However, the companies did not reveal financial details of the deal.
Per the agreement, Aker will deliver two dynamic and two steel tube umbilicals of a total length of 16.5 kilometers (approximately 10 miles). The umbilicals − scheduled for delivery next year − will be designed, engineered and manufactured at Aker’s facility in Mobile, Alabama.
Erha North phase two, located approximately 97 kilometers offshore Nigeria in water depths ranging between 1,000 meters (3,300 feet) and 1,200 meters (3,950 feet), marks an extension of the existing Erha subsea system and infrastructure.
ExxonMobil operates the Erha developments through its subsidiary, Esso Exploration and Production Nigeria Limited. It holds a 56.25% participating interest in the OML 133 production sharing contract region. On the other hand, a Nigerian affiliate of Royal Dutch Shell plc (RDS.A), Shell Nigeria Exploration and Production Co., holds the remaining 43.75%.
Erha North is one of the many oil and gas ventures, which have been delayed for years. This was due to the inability of the Nigerian National Petroleum Corporation and the International Oil Companies to enter into a contract on their costs estimated at more than $30 billion.
Although we remain skeptical due to ExxonMobil's continued disappointing production trend, we expect major capital projects and upstream ventures to drive 2013 production volume. Additionally, the start-ups of Kearl and Kashagan and the production ramp-up from 2012 start-ups in Angola and Nigeria are also added incentives. The company boasts diversified operations across the world with several new projects coming online through 2013.
ExxonMobil retains a Zacks Rank #3, which is equivalent to a short-term Hold rating. Meanwhile, there are certain other companies in the oil and gas sector that are expected to perform well and are worth buying now. These include Total SA (TOT) and Statoil ASA (STO) with a Zacks Rank #2 (Buy).
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