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Exxon Barred from Jubilee Field
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ExxonMobil Corp. (XOM - Analyst Report) stepped back from its decision to buy a stake of Kosmos Energy’s Jubilee oil field in Ghana. The deal was for $4 billion. The oil giant was compelled to cancel the deal due to extreme pressure from Ghana government and strong resistance from the state oil company, Ghana National Petroleum Corporation (“GNPC”).
Partnered with Tullow oil (“TLW”) and Anadarko Petroleum Corp (APC - Analyst Report), Kosmos discovered the Jubilee field in 2007. Kosmos has been searching for bidders for its share of the field. Last year, Kosmos had finally agreed to sell its stake to Exxon.
Jubilee is one of the largest onshore African oilfield discoveries in the recent years and has become the most tempting target for big oil companies. The field is expected to come online by the middle of next year with an estimated capacity of 120,000 barrels per day.
Ghana government welcomed Kosmos’ decision to discard the sale and said that the company will obey the country’s rules to develop the field in future. On the other side, GNPC reaffirmed its desire to boost its holdings in the field.
The cancellation of the deal is no doubt a solid blow to Exxon, representing the power of oil rich nations, which have often driven international oil companies out of some of the world’s most prolific oil fields.
Exxon has established a track record of acquisitions. In June, it completed the XTO Energy acquisition to gain significant access to unconventional gas resources. However, the company failed this time to take entry in an oil rich country such as Ghana.
While access to new energy resources is becoming more difficult, Exxon is facing headwinds to replace its reserve. However, the company’s conservative capital management, cash returns to shareholders and pristine balance sheet helps it to maintain its strong position in the industry.
We remain unchanged with our short-term (1-3 months) and long-term (6+ months) Neutral recommendation and the Zacks #3 Rank (Hold).
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