XOM Moving Ahead with Rosneft

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U.S. energy behemoth ExxonMobil Corporation (XOM) and Rosneft – Russia’s biggest oil producer – are making joint forays into new areas. Back in Aug 2011, the duo had entered into a long-term strategic cooperation agreement.  

So far, the achievements of the duo include the formation of the Kara Sea and Black Sea joint ventures, exploration of seven other licenses in the Russian Arctic and managing the joint West Siberia tight oil project.

Going forward, the already present Black Sea and Kara Sea joint ventures, respectively, Tuapsemorneftegaz SARL and Karmorneftegaz SARL, will implement project activities as operators pursuant to the agreement with Rosneft, which is the license holder. Rosneft holds a 66.67% interest and ExxonMobil holds a 33.33% interest in the two projects. The initial cost of exploration in the two areas is estimated at more than $3.2 billion, the majority of which will be dished out by ExxonMobil.

Further, the companies have agreed to move to the next study phase for an LNG development in the Russian Far East. Pursuant to the agreement, the parties will undertake work to determine an LNG plant site, gas liquefaction technologies and the commercial structure of the project.

The companies sign another agreement for a tight oil pilot project in West Siberia, where data collection operations are currently underway. Rosneft will hold a 51% interest and ExxonMobil will hold a 49% interest in this project.

Exxon Mobil is the world’s largest publicly traded oil company, engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Approximately 83% of Exxon Mobil’s earnings come from its operations outside the U.S.

Exxon Mobil is one of the world’s best-run integrated oil companies given its track record of superior returns on capital employed. The energy giant has long been a core holding for investors seeking a defensive name with continued dividend growth. Exxon Mobil is fairly active in its investment program. The company plans to spend about $185 billion over the next five years, up 29% from the last five-year period.

The capital expenditure covers as many as 21 important oil and gas projects currently under the anvil and are estimated to accumulate over 1 million net oil-equivalent barrels per day by 2016. It includes the Kearl Oil Sands development project in Canada, four in West Africa and Kashagan Phase 1 in Kazakhstan. Exxon is also engaged in a large liquefied natural gas project in Papua New Guinea, which is expected to begin deliveries in 2014. It will unearth more oil from the development of the Hebron oil field, offshore the Canadian province of Newfoundland and Labrador. The development will help in recovering over 700 million barrels of oil and the platform is expected to yield its first oil towards the end of 2017.

Exxon Mobil holds a Zacks Rank #3 (Hold). However, in the near term, stocks like Summit Midstream Partners, LP (SMLP), Enerplus Corporation (ERF) and Ferrellgas Partners LP (FGP) with Zacks Rank #1 (Strong Buy) are expected to outperform the market.
 

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