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ExxonMobil's Australia Bass Strait Assets Up for Sale Again

Zacks Equity Research

Exxon Mobil Corporation XOM intends to divest its 50% interest in the Gippsland Basin hydrocarbon development in Australia's Bass Strait. The company currently operates in the basin with its joint venture partner BHP Group BHP. Notably, this is the second time ExxonMobil is attempting to shed oil and gas operations in southeast Australia over the past three years.

The divestment is estimated to bring $3 billion to ExxonMobil, which was recently dropped from the S&P 500 Index’s top 10 companies, ending a nine-decade-long streak. The assets in focus, including offshore platforms, Longford gas plants and Long Island Point plant, are crucial as these are major suppliers of gas in the east coast market. As such, the sale can be a lucrative opportunity for domestic companies to boost their portfolio. Nevertheless, the aging fields in the southeast Australia might bear significant decommissioning costs, which can reduce its potential of fetching big bucks.

The latest move is in line with the company’s divestment plans. It intends to generate $15 billion in cash through 2025 by selling assets. This might include the divestment of stakes in oil and natural gas resources in the U.K. North Sea, along with some of its deep-water Gulf of Mexico assets.

The company always looks for better opportunities. The divestment of Gippsland Basin hydrocarbon assets will likely enable it to focus on prolific upstream prospects globally, given a number of major projects coming online over the next few years.

Markedly, the largest publicly-traded energy company made 14 offshore oil discoveries in Guyana, where it intends to focus more. Moreover, the company made the world's third biggest natural gas discovery in the last two years in the Glaucus-1 well, located off the coast of Cyprus. This discovery may comprise 5-8 trillion cubic feet of natural gas resource. Notably, in a bid to address transport constraints and pump out five times more oil from the Permian through 2025, ExxonMobil is investing billions in the basin’s midstream infrastructure.

In addition to allowing it to focus on better opportunities, the divestments might enable the company to return cash to its shareholders through a long-awaited share buyback program.

Price Performance

ExxonMobil has gained 6.8% year to date compared with 0.7% growth of the industry it belongs to.

Zacks Rank and Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are National Oilwell Varco, Inc. NOV and Dril-Quip, Inc. DRQ. While National Oilwell sports a Zacks Rank #1 (Strong Buy), Dril-Quip has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 137.5% year over year.

Dril-Quip’s 2019 earnings per share are expected to rise 127% year over year.

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BHP Group Limited (BHP) : Free Stock Analysis Report
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