Still a Leading Long-Term E&P Stock
Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Exxon Mobil (NYSE: XOM) is making a number of promising strides in the E&P industry. It's aggressively working towards expanding its global portfolio to capitalize in areas with abundant liquid fuel reservoirs while utilizing its expertise to discover new areas with great potential. It's also divesting its interests in areas that have proven to be unprofitable for the time being. Additionally, there's a promising future ahead for Exxon Mobil that is fueled by advancements in technology that can improve its core operations in conjunction with the industry at large as well. My discussion of Exxon will focus on the primary reasons why current shareholders should hold onto this valuable stock for the long-term while interested investors should buy this asset now for reliable dividend increases and long-term capital appreciation.
In mid-June, Exxon Mobil and Rosneft (RNGZY) established a joint venture to develop an Arctic Research Center for Offshore Developments and establish oil reserves in Western Siberia. This venture builds upon the original agreement of long-term cooperation between the two established in August 2011. The two will combine Exxon Mobil's expertise in advanced E&P technologies with Rosneft's substantial knowledge of the terrain and possible regions for abundant reserves and potential obstacles that currently impede progress.
This is the next step beyond the technical research program the two formed in April of 2012. Rosneft will conduct geological studies and the two will start drilling in 2013. Exxon Mobil will have a 33 percent interest and Rosneft will have a 67 percent interest during the developmental phase. The two hope to meet the growing energy needs of Russia while establishing a more stable market for the E&P industry. They also hope to establish an Arctic Research Center to create structures and vessels to support E&P in this region. Exxon Mobil is focusing more on promising opportunities like Russia while pulling out of Poland which has turned out to be a profitable region. Chevron (NYSE: CVX) remains in Poland in order to conduct its own due diligence, analyzing samples from two wells located in the southern region of the country. Chevron is committed to its exploration program in southeast Poland.
Exxon Mobil has been interested in the opportunities in Mexico for some time now. Recent reports suggest that Exxon Mobil may partner with the current joint venture between Anadarko Petroleum (NYSE: APC) and Plains Exploration & Production (NYSE: PXP) developing deep-water operations in the Gulf of Mexico. Plains Exploration & Production rose 2.5% on news of Anadarko's entry into the Lucius Project in early July. According to Anadarko, Exxon may enter the partnership with a 20 percent interest in the venture; in turn Anadarko would reduce its stake from 50 percent to 30 percent. Exxon Mobil would provide cash and drilling that would cover the cost of the first exploration well. Exxon Mobil is primarily interested in owning the reserves it would be drilling for in Mexico. Pemex, Mexico's national oil company claims the market is abundant in crude oil, natural gas and gas liquids reserves. Pemex does not have the resources to fully exploit the opportunity to the likelihood of Exxon Mobil, thus establishing a favorable position for the company in the market. Exxon Mobil has also recently announced it has started production off the shores of Angola through one of its subsidiaries.
Carbon Sciences (CABN) recently announced it developed clean CO2 technology to create syngas from natural gas that can be a viable feedstock for Exxon Mobil's methanol to gas (MTG) technology. As the price of natural gas decreases, more E&P's like Chesapeake Energy (NYSE: CHK) are looking to convert its natural gas into fuel-like gasoline. This recent announcement by Carbon Sciences makes Exxon's MTG technology a more viable and attractive option for creating liquid fuels like gasoline from natural gas. An efficient way to convert America's abundant natural gas reserves into liquid fuels can revolutionize the transportation industry as the country uses around 140 billion gallons of gasoline annually. Chesapeake Energy is backing a startup called Sundrop Fuels, who plans to utilize MTG technology to convert natural gas reserves into liquid fuels.
Exxon Mobil has consistently shown to be one of leaders in the E&P industry worldwide. It's shown expertise in finding and capitalizing on abundant reserves in divergent regions while being cautious enough to pull out of regions with minimal profitability or significant impediments. It also remains a leading pioneer in developing technologies to improve the E&P industry at large. Shareholders and interested investors should hold onto this stock as a long-term defensive asset that yields reliable capital appreciation and dividend payouts.
jordobivona has no positions in the stocks mentioned above. The Motley Fool owns shares of ExxonMobil and has the following options: long JAN 2013 $16.00 calls on Chesapeake Energy, long JAN 2013 $25.00 calls on Chesapeake Energy, long JAN 2014 $20.00 calls on Chesapeake Energy, and long JAN 2014 $30.00 calls on Chesapeake Energy. Motley Fool newsletter services recommend Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.