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ExxonMobil Aims to Take Full Control of Permian JV From Sinochem
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Exxon Mobil Corporation (XOM - Free Report) may soon have the opportunity to further solidify its dominance in the Permian Basin, as China state-backed oil and chemicals giant Sinochem considers selling its 40% stake in a joint venture (JV) with ExxonMobil, per a Reuters report. This move could potentially fetch more than $2 billion.
The JV, focused on the Wolfcamp formation, spans approximately 83,000 net acres in the Permian Basin of Texas. This region has been instrumental in propelling the United States to the forefront of global oil production.
Initially acquired by Sinochem in 2013 from Pioneer Resources for $1.7 billion, the stake was part of a strategic expansion into international oil and gas assets. At the time of acquisition, the venture was producing around 10,000 barrels of oil equivalent per day (Boe/d). Recent figures indicate a significant increase, with output averaging more than 44,000 Boe/d, of which approximately 75% is oil.
ExxonMobil, which already holds the majority stake and operates the joint venture, has the right of first refusal in the sale. This means that if Sinochem decides to proceed with the sale, ExxonMobil would have the first opportunity to purchase the stake before it is offered to other potential buyers.
Such a move would further strengthen ExxonMobil’s dominance in the Permian Basin, particularly following its recent $60-billion acquisition of Pioneer Resources, which marked the largest deal in a wave of consolidation sweeping through the U.S. oil industry.
While discussions regarding the sale are still in the early stages, Sinochem has engaged investment bankers at Barclays to advise on the potential divestment. If ExxonMobil chooses not to exercise its right of first refusal, other interested parties, including rival Asian national oil corporations, could enter the fray. However, there is no guarantee that a deal will be finalized, and Sinochem could ultimately decide to retain its stake in the JV.
Sinochem’s reconsideration of its involvement in the Permian Basin comes amid broader strategic shifts within the company. In recent years, Sinochem has been reevaluating its oil exploration and production activities, with a focus on pivoting toward new materials and life sciences. The Wolfcamp joint venture represents Sinochem’s largest oil and gas-producing asset outside of China, making this potential sale a significant move.
This is not the first time Sinochem has explored divesting from international oil assets. Since 2017, the company has also been attempting to sell its 40% stake in Brazil's Peregrino oilfield. Moreover, a state-mandated merger with ChemChina in 2021 has added to the company's challenges. Earlier this year, Sinochem was forced to shutter several oil refineries in eastern China to curb losses amid sluggish domestic fuel demand.
For ExxonMobil, acquiring the remaining 40% stake in the Wolfcamp JV would not only solidify its leadership in the Permian Basin but also offer strategic advantages as the global energy landscape continues to evolve. However, the outcome remains uncertain as Sinochem weighs its options in this high-stakes decision.
Zacks Rank & Stocks to Consider
ExxonMobil currently carries a Zack Rank #5 (Strong Sell).
Core Laboratories is an oilfield services company operating in more than 50 countries. The firm deals with providing reservoir management and production enhancement services to oil and gas companies.
The Zacks Consensus Estimate for CLB’s 2024 EPS is pegged at 95 cents. The company has a Zacks Style Score of B for Value, Growth and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
MPLX derives stable fee-based revenues from long-term contracts, with minimal exposure to commodity-price fluctuations. The partnership’s robust capital expenditure forecast for 2024, along with significant expansion initiatives, underscores its commitment to sustainable growth.
The Zacks Consensus Estimate for MPLX’s 2024 EPS is pegged at $4.29. The company has a Zacks Style Score of B for Value and A for Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry, with a focus on the subsea segment in offshore basins worldwide. FTI’s growing backlog ensures strong revenue visibility and supports margin improvements.
The Zacks Consensus Estimate for FTI’s 2024 EPS is pegged at $1.34. The company has a Zacks Style Score of B for Value and A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
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ExxonMobil Aims to Take Full Control of Permian JV From Sinochem
Exxon Mobil Corporation (XOM - Free Report) may soon have the opportunity to further solidify its dominance in the Permian Basin, as China state-backed oil and chemicals giant Sinochem considers selling its 40% stake in a joint venture (JV) with ExxonMobil, per a Reuters report. This move could potentially fetch more than $2 billion.
The JV, focused on the Wolfcamp formation, spans approximately 83,000 net acres in the Permian Basin of Texas. This region has been instrumental in propelling the United States to the forefront of global oil production.
Initially acquired by Sinochem in 2013 from Pioneer Resources for $1.7 billion, the stake was part of a strategic expansion into international oil and gas assets. At the time of acquisition, the venture was producing around 10,000 barrels of oil equivalent per day (Boe/d). Recent figures indicate a significant increase, with output averaging more than 44,000 Boe/d, of which approximately 75% is oil.
ExxonMobil, which already holds the majority stake and operates the joint venture, has the right of first refusal in the sale. This means that if Sinochem decides to proceed with the sale, ExxonMobil would have the first opportunity to purchase the stake before it is offered to other potential buyers.
Such a move would further strengthen ExxonMobil’s dominance in the Permian Basin, particularly following its recent $60-billion acquisition of Pioneer Resources, which marked the largest deal in a wave of consolidation sweeping through the U.S. oil industry.
While discussions regarding the sale are still in the early stages, Sinochem has engaged investment bankers at Barclays to advise on the potential divestment. If ExxonMobil chooses not to exercise its right of first refusal, other interested parties, including rival Asian national oil corporations, could enter the fray. However, there is no guarantee that a deal will be finalized, and Sinochem could ultimately decide to retain its stake in the JV.
Sinochem’s reconsideration of its involvement in the Permian Basin comes amid broader strategic shifts within the company. In recent years, Sinochem has been reevaluating its oil exploration and production activities, with a focus on pivoting toward new materials and life sciences. The Wolfcamp joint venture represents Sinochem’s largest oil and gas-producing asset outside of China, making this potential sale a significant move.
This is not the first time Sinochem has explored divesting from international oil assets. Since 2017, the company has also been attempting to sell its 40% stake in Brazil's Peregrino oilfield. Moreover, a state-mandated merger with ChemChina in 2021 has added to the company's challenges. Earlier this year, Sinochem was forced to shutter several oil refineries in eastern China to curb losses amid sluggish domestic fuel demand.
For ExxonMobil, acquiring the remaining 40% stake in the Wolfcamp JV would not only solidify its leadership in the Permian Basin but also offer strategic advantages as the global energy landscape continues to evolve. However, the outcome remains uncertain as Sinochem weighs its options in this high-stakes decision.
Zacks Rank & Stocks to Consider
ExxonMobil currently carries a Zack Rank #5 (Strong Sell).
Investors interested in the energy sector may look at some better-ranked stocks like Core Laboratories N.V. (CLB - Free Report) , MPLX LP (MPLX - Free Report) and TechnipFMC plc (FTI - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Core Laboratories is an oilfield services company operating in more than 50 countries. The firm deals with providing reservoir management and production enhancement services to oil and gas companies.
The Zacks Consensus Estimate for CLB’s 2024 EPS is pegged at 95 cents. The company has a Zacks Style Score of B for Value, Growth and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
MPLX derives stable fee-based revenues from long-term contracts, with minimal exposure to commodity-price fluctuations. The partnership’s robust capital expenditure forecast for 2024, along with significant expansion initiatives, underscores its commitment to sustainable growth.
The Zacks Consensus Estimate for MPLX’s 2024 EPS is pegged at $4.29. The company has a Zacks Style Score of B for Value and A for Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry, with a focus on the subsea segment in offshore basins worldwide. FTI’s growing backlog ensures strong revenue visibility and supports margin improvements.
The Zacks Consensus Estimate for FTI’s 2024 EPS is pegged at $1.34. The company has a Zacks Style Score of B for Value and A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.