U.S. energy behemoth Exxon Mobil Corp. (XOM) has entered into a non-monetary exchange agreement with LINN Energy LLC (LINE) to add 17,800 net acres in the Permian Basin to its U.S. oil and natural gas portfolio.
Per the agreement, LINN Energy will receive interest in about 500 net acres from ExxonMobil's South Belridge Field, near Bakersfield, CA. In the agreement, ExxonMobil will receive 17,000 net acres in the Midland Basin core area in west Texas. The acreage is the most prospective among horizontal Wolfcamp and Spraberry developments, currently producing about 4,700 oil-equivalent barrels per day. ExxonMobil will also receive 800 net acres in the New Mexico Delaware Basin. Both acreage positions will be operated and developed by its wholly owned subsidiary XTO Energy.
This is the second non-monetary exchange agreement with LINN Energy in 2014. In May, ExxonMobil added nearly 26,000 acres in the Permian Basin. In that agreement, LINN Energy received a portion of ExxonMobil's interest in the Hugoton gas field in Kansas and Oklahoma.
This agreement extends XTO Energy's leasehold position across the entire Permian Basin to more than 1.5 million acres and net oil-equivalent production to more than 95,000 barrels per day.
Exxon Mobil is the world’s largest publicly traded oil company, engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Approximately four-fifth of Exxon Mobil’s earnings come from its operations outside the U.S.
Exxon Mobil is one of the world’s best-run integrated oil companies given its track record of superior returns on capital employed. The energy giant has long been a core holding for investors seeking a defensive name with continued dividend growth. Exxon Mobil is fairly active in its investment program. The company plans to spend about $185 billion over the next five years, 29% higher than the last five-year period.
The strength of Exxon Mobil lies in its balanced operations, strong financial flexibility, steady improvement in efficiency and cost control. The company’s efforts to build an unconventional resource portfolio both in North America and overseas are aimed at increasing production through a wider exposure to large energy resources with a long reserve life and low field declines. However, we are skeptical about the company’s near-term performance due to its muddled refining fortunes.
Exxon Mobil currently holds a Zacks Rank #3 (Hold). Investors interested in the oil and gas sector could consider better-ranked stocks like Pioneer Energy Services Corp. (PES) and Cameron International Corporation (CAM). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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