Irving, Texas-based ExxonMobil Corporation (XOM) and Canada’s Americas Petrogas Inc. jointly plan to drill wells in Argentina next month in a search for shale gas.
ExxonMobil gained a 45% stake in Petrogas’ Los Toldos blocks following a $76.3 million agreement with the Canadian company, announced in August. Subsequent to the signing of the deal, ExxonMobil will possess more than 310,000 net acres in the Neuquen Basin.
Petrogas’ Los Toldos blocks, sprawling over 163,500 acres in the Neuquen Basin, are in the same Vaca Muerta formation where the Argentine oil producer YPF, a subsidiary of Repsol YPF SA, made a massive discovery of 927 million barrels of oil equivalent.
Being the operator of the blocks, Petrogas is in possession of all the operational information. According to the US Energy Information Administration, the unconventional Vaca Muerta formation is estimated to contain nearly 240 trillion cubic feet of recoverable gas.
The transformation in U.S. oil and gas industry is evident with the advancement in drilling and extraction technologies. To take advantage of this revolution, ExxonMobil is planning to work closely with other companies through joint ventures for maximum development and utilization of the resource.
ExxonMobil’s quest for gas in Argentina will be profitable in the long term as the country is believed to have huge quantities of oil and gas enclosed in tight sands and shale rock formations. In fact, the US Energy Information Administration has ranked Argentina the third country in terms of recoverable shale gas resources.
ExxonMobil holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. We maintain a Neutral rating on the stock for the long term. The company also faces tough competition from its competitors Chevron Corporation (CVX) and ConocoPhillips (COP).
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