Exxon Mobil Corporation XOM, through its subsidiary XTO Energy Inc. and affiliates, entered into an agreement to divest Williston Basin assets to Chord Energy Corporation CHRD for $375 million.
The transaction is expected to be funded with cash on hand, which was $592 million as of Mar 31, 2023.
The divested assets involve about 62,000 net acres in Williston Basin within and adjacent to near-term development program. Almost 77% of this is undeveloped. The low-cost, tier-one assets are highly competitive with Chord Energy’s existing portfolio and further extend its inventory runway.
Headquartered in Houston, CHRD is an independent exploration and production company, and one of the leading oil and gas producers in the Williston Basin. In 2022, the company added 51.5 million barrels of oil equivalent of net proved reserves due to successful drilling in the basin.
The acquisition has allowed Chord Energy to expand six of its pre-acquisition drilling spacing units from 2 miles to 3 miles. The acreage, fully held by production, has 123 estimated net 10,000-feet equivalent locations.
The acquisition also comprises of royalty interests in certain drilling and spacing units. It includes current production of more than 6 thousand barrels of oil equivalent per day, with a low base decline rate of 23%. Almost 62% of the net production is oil.
Chord Energy expects the acquisition to boost cash flow, free cash flow and return metrics in both near and long-term. It looks forward to continue returning more than 75% of free cash flow, resulting in increased stockholders' equity.
ExxonMobil is expected to have started selling hydrocarbon-containing properties as it seeks to cut down debt by divesting some of its non-core assets. The transaction is expected to be closed by the end of June 2023 and be retroactive from Apr 1.
Shares of XOM have outperformed the industry in the past year. The stock has gained 11.2% compared with the industry’s 1.7% growth.
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Zacks Rank & Key Picks
ExxonMobil currently carries a Zack Rank #3 (Hold).
A couple of better-ranked stocks for investors interested in the energy sector are Enterprise Products Partners LP EPD and Dril-Quip, Inc. DRQ, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Enterprise Products reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, which beat the Zacks Consensus Estimate of 62 cents. This was primarily due to higher contributions from the Natural Gas Pipelines & Services business.
In the first quarter, Enterprise Products generated an adjusted free cash flow of $1,347 million against a negative free cash flow of $1,618 million in the year-ago quarter. EPD recorded distributable cash flow of $863 million in the same time frame.
Dril-Quip reported a first-quarter 2023 adjusted loss of 1 cent per share, narrower than the Zacks Consensus Estimate of a loss of 2 cents. This was due to improved performances of key offshore markets and some reemerging areas.
For 2023, Dril-Quip expects product bookings to increase 10-20% year over year. The company reported net bookings of $53.5 million for the first quarter. Backlog rose 6% year over year due to an increase in product bookings following improved market conditions.
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