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ExxonMobil Corporation ( XOM - Analyst Report) has entered into exclusive negotiation with Houston-based InterOil Corporation ( IOC - Snapshot Report) and its joint venture partner Pacific LNG for a possible oil deal in Papua New Guinea. The financial details and the timing of the deal have not yet been revealed.
Per the agreement, ExxonMobil is likely to invest in InterOil’s Petroleum Retention License 15, which would give ExxonMobil a working interest in certain discoveries related to the Elk and Antelope fields in the Gulf Providence of Papua New Guinea. These fields are currently majority owned by InterOil along with a minority working interest of Pacific LNG.
Back in 2009, InterOil inked a deal with the government to develop a large-scale liquefied natural gas project. Since then the oil giant has been under pressure by the Papua New Guinea government to look for a company with more experience in building and operating a massive LNG facility.
InterOil and its partner hold licenses to explore around 3.9 million acres, which are projected to contain recoverable sales gas volume of 9 trillion cubic feet.
ExxonMobil’s $19 billion PNG LNG project in Papua New Guinea is expected to begin gas deliveries in 2014. The project is estimated to have production capacity of 6.9 million tons a year, significantly contributing to the nation’s GDP.
ExxonMobil’s recent farm-in in a natural-gas block would provide gas to its LNG facility and also facilitate it in participating in the booming Asian markets. The additional gas would also help ExxonMobil to develop another LNG train at its Konebada site.
Another alternative being considered is funding of the InterOil and Pacific LNG project to drill further delineation wells in the Elk and Antelope fields, which are part of the license.
ExxonMobil carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) stocks – Dawson Geophysical Company ( DWSN - Snapshot Report) and Exterran Holdings, Inc. –are expected to outperform over the next few months.