Exxon Mobil Corporation XOM continues to gain from its holding in some of the most prolific upstream assets globally, particularly the Stabroek Block. The block’s exploration potential was proven again with the ninth discovery at the Hammerhead-1 well, offshore Guyana.
Hammerhead-1 well also represents the fifth find on the Stabroek Block in the past year. Located about 13 miles southwest of the Liza-1 well, the Hammerhead-1 encountered about 197 feet (60 meters) of superior, oil-bearing sandstone reservoir. The drilling of the well was commenced on Jul 27, 2018, using the Stena Carron drillship to reach a total depth of 13,862 feet (4,225 meters) in 3,773 feet (1,150 meters) of water.
The previous outstanding discoveries on the Stabroek Block include Liza, Payara, Liza Deep, Snoek, Turbot, Ranger, Pacora and Longtail. Currently, results of Longtail are under appraisal. The combined gross recoverable resources from all these discoveries are projected to surpass 4 billion barrels of oil equivalent. The discoveries made so far on the Stabroek Block have the potential to add about five floating production, storage and offloading (FPSO) vessels capable of yielding over 750,000 barrels per day by 2025.
Considering the low costs, these reserves are likely to raise stakeholders’ value. Thus, a second exploration vessel, the Noble Tom Madden, is expected to reach Guyana in October to ramp up exploration of high-potential prospects that have not been drilled. Noble Tom Madden will begin drilling at the Pluma prospect about 17 miles (27 kilometers) from Turbot.
The first oil from the Liza Phase 1 is anticipated by early 2020. It will use the Liza Destiny FPSO vessel, whose construction I underway, to produce about 120,000 barrels of oil per day. Phase 2, which awaits the necessary approvals, is scheduled to complete all formalities by the end of 2018. Phase 2 will use a second FPSO intended to yield about 220,000 barrels per day and is projected to start production in 2022. With the targeted sanctioning in 2019, a third development — Payara — will use an FPSO intended to produce about 180,000 barrels of oil per day as early as 2023.
Stabroek Block has an acreage of 6.6 million (26,800 square kilometers). Exxon’s affiliate, Esso Exploration and Production Guyana Limited, the operator, holds 45% interest in the Stabroek Block. Hess Corporation HES holds 30% and CNOOC Limited CEO holds 25% interest.
Exxon and its partners have fortified their foothold on an ever-expanding oil field offshore Guyana. Hess is likely to benefit from availability of octane in the ever-expanding reserves offshore Guyana, which is used to produce heavier naphtha components appropriate for reforming.
Price Performance
In the past year, Exxon’s shares have increased 5.5% compared with the industry’s 16.6% rise.
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Zacks Rank & Stocks to Consider
Exxon currently carries a Zacks Rank #3 (Hold).
A better-ranked player in the same sector is Petroleo Brasileiro S.A. PBR, or Petrobras SA, which flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.
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