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Eni Reportedly Inks Deal to Sell Stake in Area 4 to ExxonMobil

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According to sources, Italian oil firm Eni SpA (E - Free Report) has concluded the deal related to the sale of a multi-billion dollar stake in its planned Mozambique liquefied natural gas development to ExxonMobil Corporation (XOM - Free Report) . Interestingly, neither has an official announcement been made as yet nor is likely to be made in several months to come, at ExxonMobil’s behest. Eni too refused to reveal further details.

Eni has already made a substantial discovery of offshore gas reserves in Area 4. The huge discovery requires a giant land-based LNG export plant with proximity to the Asian and the Middle Eastern growing markets in order to become a potentially highly-rewarding project.

The long running discussion to get a partner with huge spending power has been delayed due to differences over valuations owing to decline in oil and gas prices.

Eni sold 20% of its Area 4 license to China’s CNPC for $4.2 billion in 2013. However, oil and gas prices have fallen by more than 50% since then.

In Oct 2015, ExxonMobil was awarded three offshore exploration license blocks located south of Eni’s discoveries. This gave a new dimension to development prospects of the area.

Initially, Eni did not intend to sell more than 10–15% of its stake in Area 4 permit, where it discovered 85 trillion cubic feet of gas. However, the company is reconsidering its decision now and has raised the possibility of it selling about 25% stake in the permit.

After much contemplation, both parties have finally reached an agreement. According to the deal ExxonMobil would get its preferred operating stake in the onshore LNG export plant, while Eni would retain control over the Area 4 gas fields feeding it.

Eni is anticipated to export gas as LNG from at least one floating offshore platform in the Coral field development in Area 4. However, it will mainly concentrate on the larger land-based plants. Notably, ExxonMobil will have no share from the Coral field and Eni will sell LNG from the Phase I development of this field to BP.

Eni currently holds a Zacks Rank #2 (Buy). Other well-ranked players from the energy sector are Enbridge, Inc. (ENB - Free Report) and Total SA . Both these stocks sport a Zacks Rank #1 (Strong Buy).

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