U.S. energy behemoth ExxonMobil Corporation XOM is contemplating the purchase of a significant stake in Italian operator Eni SpA’s E gas-rich acreage in Area 4, offshore Mozambique.
Per Reuters, ExxonMobil is in talks to acquire a 15% stake in the asset. In fact, according to people familiar with the matter, the oil giant may even be interested in acquiring Eni’s entire 50% interest in the area. A third source has said that the company was keen on other Eni assets.
Located in Mozambique's Rovuma Basin, Area 4 is estimated to hold about 85 trillion cubic feet of gas in place. Eni currently holds a 50% stake in Area 4, which is considered to be one of the most prolific discoveries of recent times.
Eni, while announcing its strategic plan in mid-March, mentioned that it intends to divest assets worth 7 billion euros ($7.9 billion) by 2019, primarily through the sale of interests in new discoveries.
According to its new plan for 2016–2019, the company also intends to cut capital expenditure by 21% to 37 billion euros and reduce upstream spending by 18%. Per its divestment plan, Eni proposes to sell interest in the Rovuma basin play. Also, sales of stake in Congo-Brazzaville and assets in Egypt may be on the cards.
Eni is expected to take a final investment decision regarding its Coral floating liquefied natural gas project in Area 4 within a few months. Coral is expected to be brought online by 2021.
Several floating liquefied natural gas (FLNG) vessels on the field are also being targeted by the company. Additionally, Eni is working on sanctioning its Mamba onshore LNG scheme in Area 4 by late 2017.
This is an important move for ExxonMobil as it adds oil and gas reserves through acquisitions as oil prices fall. Notably, the vast production capacity of Eni’s Mozambique acreage attracted high valuations two years ago, when Eni sold 20% interest to China's CNPC for $4.2 billion, amid strong competition for reserves.
Currently, ExxonMobil carries a Zacks Rank #5 (Strong Sell). Some better-ranked players from the energy sector are SolarEdge Technologies, Inc. SEDG and Enviva Partners, LP EVA. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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