Exxon Buys Ghana Oil Field Stake

ExxonMobil (XOM - Analyst Report) has agreed to buy Kosmos Energy’s stake in oil blocks of Jubilee oil field offshore the West African country of Ghana for approximately $4 billion. Many of the world’s big oil companies had shown interest in this deal. This includes Royal Dutch Shell (RDS.A - Analyst Report), BP plc (BP - Analyst Report) and CNOOC (CEO - Analyst Report) of China. 

The transaction marks the first entry by any oil major in this area. Kosmos Energy is a privately held international oil exploration and production company with a primary focus on West Africa. Kosmos holds 30.875% of the West Cape Three Points Block and 18% of the Deepwater Tano block. 

Its partners are Tullow Oil PLC (TLW) and Anadarko Petroleum Corporation (APC - Analyst Report). The Jubilee field, discovered in 2007 off the coast of Ghana, could potentially hold 650 million barrels to 2 billion barrels of oil equivalent. Production from the company’s ongoing projects in West Africa will play a leading role in upstream growth. 

We view this deal a positive as the transaction could help the company to sustain production growth over the next few years. With interests in 13 blocks totaling more than 13 million acres excluding the Jubilee acreages, Exxon holds some of the largest acreages in West Africa. 

These include extensive operations in Angola, Nigeria, Chad, Equatorial Guinea, and Niger, among others. In addition to acquisitions, Exxon’s organic growth opportunities would provide further upside. 

The company’s leading position in the oil industry reflects the size and diversity of its asset base, both in terms of business mix as well as geographical footprint. Our long-term recommendation for ExxonMobil shares is Neutral, which means that the stock will perform in line with the broader market.

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