ExxonMobil Corporation (XOM) has opted to divest its 25% share in an offshore Brazilian oil prospect after it drilled a couple of crude oil wells to no avail.
Along with partners, Hess Corporation (HES) and Petroleo Brasileiro, aka, Petrobras (PBR), Exxon is searching the fourth party for the Brazilian offshore block, BM-S-22. The prospective buyer will have to finance the drilling of one well against Exxon’s 25% stake in the block, which has already gained drilling approval from the Brazilian government.
ExxonMobil enjoys the operatorship of the block with a 40% interest through its subsidiary, Esso. Its associate partners Hess and the Brazil's state-run oil company Petrobas hold 40% and 20% stake, respectively, in the prospect.
Located about 215 miles south of Rio de Janeiro in the Santos Basin, block BM-S-22 is situated approximately 7,000 feet under water. Exxon approximated that the block may hold up to 1.5 billion barrels of gross recoverable oil reserves in a layer of the earth's crust known as the pre-salt. It gave way discoveries such as Lula, a 6.5 billion-barrel field previously known as Tupi. The project is slated for a fourth quarter 2012 start-up.
ExxonMobil is the world’s best-run integrated oil company given its track record of superior return on capital employed. As the largest publicly traded oil company, it has long been a core holding for investors seeking a defensive name with continued dividend growth.
Although the company remains fairly active in its investment program, reflected by a $34 billion capital expenditure budget for 2011, we remain disappointed by its relatively low production target (total output growth of 3% to 4% in 2011 and 4% to 5% per year on average through 2014). Hence, we expect the stock to perform in line with the broader market and maintain our long-term Neutral recommendation.
HESS CORP (HES): Free Stock Analysis Report
PETROBRAS-ADR C (PBR): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment