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Exxon Wins 3 Leases in GoM

Zacks Equity Research

U.S. oil giant, ExxonMobil Corporation (XOM) has been awarded three leases in the Gulf of Mexico (GoM) boundary area.

The leases are subject to the U.S.-Mexico Transboundary Hydrocarbons Agreement, which removes ambiguities related to development of transboundary resources in the GoM.

The agreement makes available an additional acreage of about 1.5 million of the U.S. Outer Continental Shelf for further exploration and production activities. According to the Department of the Interior’s Bureau of Ocean Energy Management (:BOEM), the area is estimated to hold about 172 million barrels of oil (MMbbl) and 304 billion cubic feet (Bcf) of natural gas.

In Aug 2013, ExxonMobil submitted bids for the blocks that are located fully or partly within three statute miles of the maritime and continental shelf boundary with Mexico (the US-Mexico Transboundary Area) at Western Planning Area Sale 233. The bids were approved by the Congress in Dec 2013 and thereafter signed by the President on Dec 26.

The three sealed bids that added up to $21,333,850, were opened by BOEM during the Eastern and Central Planning Area Sales held on Mar 19. The lease located in the Alaminos Canyon Area, 170 miles east of Port Isabel, TX, effective Jul 18, will be subject to terms of the Transboundary agreement.

The agreement builds a new level of certainty for U.S. and Mexican firms working in the Gulf border regions. Moreover, it provides guidelines for the development of oil and natural gas reservoirs that traverses the maritime boundary. Per the agreement, both the U.S. companies and Mexico’s Pemex will be able to voluntarily enter into agreements to jointly develop such reservoirs.

In case a concurrence cannot be achieved, the Transboundary agreement lays down a process that allows both U.S. companies and Pemex to individually develop the resources on each side of the border, while protecting each nation’s interests and resources.

The Transboundary agreement also entails the formation of joint inspection teams by the Bureau of Safety and Environmental Enforcement, and the Mexican government to ensure conformity to applicable laws and regulations. Suitable agencies on both sides of the boundary will evaluate all plans for the development of transboundary reservoirs. Moreover, before the commencement of development activities, additional requirements may be set, if required.

Currently, ExxonMobil carries a Zacks Rank #3 (Hold). However, better-ranked oil and gas stocks include Encana Corp (ECA), CVR Refining, LP (CVRR) and Matrix Service Co. (MTRX), which are attractive picks in the near term. All of these sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on MTRX
Read the Full Research Report on XOM
Read the Full Research Report on ECA
Read the Full Research Report on CVRR


Zacks Investment Research