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ExxonMobil to Divest GoM Assets to Repsol for Around $1B


Exxon Mobil Corporation XOM is expected to sell some of its deep-water Gulf of Mexico (GoM) assets to Spanish integrated energy company Repsol, S.A. REPYY, per Reuters. The divestment is expected to fetch ExxonMobil up to $1 billion.

Notably, ExxonMobil — which was recently dropped from the S&P 500 Index’s top 10 companies, ending a nine-decade-long streak — had expressed interest to divest some of the operated and non-operated assets in the region last October. The deal with Repsol requires approval from ExxonMobil’s partners in the related projects, who may have preferential rights to acquire the assets. While buying out the assets would increase Repsol’s footprint in the area, it will help ExxonMobil with its divestment plans.

The company intends to generate $15 billion in cash through 2025 by selling assets. This might include the divestment of stakes in oil and natural gas resources in U.K. North Sea after more than 50 years of presence in the region.

Divestment Rationale

The company always looks for better opportunities. The divestment of GoM assets will likely enable it to focus on prolific upstream prospects globally, given a number of major projects coming online over the next few years.

Markedly, the largest publicly-traded energy company made 13 offshore oil discoveries in Guyana, where it intends to focus more. Moreover, the company made the world's third biggest natural gas discovery in the last two years in the Glaucus-1 well, located off the coast of Cyprus. The new discovery may comprise 5-8 trillion cubic feet of natural gas resource. Notably, in a bid to address transport constraints and pump out five times more oil from the Permian through 2025, ExxonMobil is investing billions in the basin’s midstream infrastructure.

In addition to allowing it to focus on better opportunities, the divestments might enable the company to return cash to its shareholders through a long-awaited share buyback program.

Price Performance

The company has gained 5.7% year to date against the 2.2% decline of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, ExxonMobil has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are National Oilwell Varco, Inc. NOV and NuStar Energy L.P. NS, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 100% year over year.

NuStar Energy’s third-quarter 2019 earnings per share are expected to gain more than 107% year over year.

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