ExxonMobil (XOM) to Start Exploration in Disputed Territory
Exxon Mobil Corporation XOM has been awarded an exploration license by Guyana. The license allows the energy giant to look for oil and gas in a disputed area off the coast of South America, where the Venezuelan military had previously expelled two U.S. oil companies. This recent move by Guyana may escalate its tension with neighbouring Venezuela.
The energy giant plans to drill two exploration wells in the north and west of the Stabroek block, which has three fields that produce close to 650,000 barrels of oil in a day.
The disputed area is a part of the Essequibo region. While Guyana firmly states its ownership of the area, Venezuela has long claimed the territory as its own. Recently, Venezuela has also conducted a referendum on the subject, where voters supported the call to annex it. Mineral-rich Essequibo accounts for nearly two-thirds of Guyana and lies in close proximity to huge offshore oil deposits.
According to ExxonMobil Guyana, concessions have been granted, and the company shall proceed with operations in the disputed area despite the country’s ongoing tensions with Venezuela. Guyana’s foreign secretary has assured that ExxonMobil has the right to work in the area because it is well within the established boundaries of Guyana waters.
Many prior attempts to look for oil and gas in the area have failed. ExxonMobil was forced to abandon exploration and production activities in the region after a Venezuelan military helicopter tried to land on a seismic vessel, back in 2019. Also, in 2013, the crew on a seismic vessel contracted by a Texas petroleum company was detained by Venezuela for a week.
The latest push by ExxonMobil came after both Guyana and Venezuela agreed to meet for a second time and resolve the Essequibo region dispute. While both parties have refrained from using any force against each other, they haven’t come any closer to settling the dispute. In the meanwhile, the United States is helping Guyana with increased military aid and has promised to help them buy new aircraft, helicopters and a fleet of military drones. The country is also helping Guyana with radar technology for the first time. While direct military confrontation between the two countries seems unlikely, many countries, along with Guyana, have raised concerns regarding the potential annexation of its territory by Venezuela.
The new exploration wells can be beneficial for ExxonMobil to increase its production capacity in Guyana. With oil prices averaging more than $70 per barrel, the upstream business of the company can expect profitable growth from greater volumes.
Zacks Rank and Key Picks
Currently, XOM carries a Zacks Rank #3 (Hold).
Investors might want to look at some better-ranked stocks in the energy sector, such as VAALCO Energy EGY, Repsol REPYY and First Solar FSLR. While Vaalco currently sports a Zacks Rank #1 (Strong Buy), Repsol and First Solar hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
VAALCO Energy is an independent energy company involved in upstream operation business with a diversified presence in Africa and Canada. With a large inventory of drilling locations in premium Canadian Acreage, the company’s production outlook seems bright.
Repsol is a global multi-energy company, involved in exploration and production activities as well as refining and marketing petroleum products. The company is also actively involved in transitioning toward cleaner and more sustainable energy solutions. Recently, it announced the expansion of its network of renewable fuel refilling stations in Europe, demonstrating its commitment to a sustainable energy model.
First Solar is a market leader in comprehensive PV solar energy solutions. It specializes in designing, manufacturing and selling solar electric power modules. The company sells its products to project developers, system integrators and renewable energy project operators based out of Europe, particularly Germany. With the rising global trend to shift toward renewable energy solutions, the outlook for First Solar seems bright.
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