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Exxon Mobil to Buy Bass Family Assets, Double Permian Yield

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Exxon Mobil Corporation XOM recently announced its intention to more than double its Permian Basin resource of 6 billion barrels of oil equivalent. The company aims to achieve this through the buyout of companies owned by the Bass family of Fort Worth, TX.

These acquired assets are estimated to hold resources of 3.4 billion barrels of oil equivalent in New Mexico’s Delaware Basin. Alongside an upfront payment of $5.6 billion, Exxon Mobil will make a series of additional contingent cash payments of up to $1 billion. The payments are to be made from 2020 and ending no later than 2032, in accordance to the development of the resource.

The acquired companies, which include the operating entity BOPCO, are estimated to have about 275,000 acres of leasehold and production capacity of over 18,000 net oil equivalent barrels per day, of which about 70% is liquids. This includes about 250,000 acres of leasehold in the Permian Basin, the majority of which lies in adjacent, held-by-production units in the New Mexico Delaware Basin. These properties have over 60 billion barrels of oil equivalent estimated in place.

Shares of ExxonMobil have gained 14.4% in the last one year, while the Zacks categorized Oil & Gas-International Integrated industry has gained 32.6%, in the same time span. The announcement is expected to positively impact the stock price.

The company intends to use the position to drill longer horizontal wells, a technique many have adopted in the recent oil crash to lower costs by extending the reach of drilling operations.

Exxon Mobil’s production across its Permian Basin leasehold is about 140,000 net oil-equivalent barrels per day.

Exxon Mobil is the latest to jump on the bandwagon of purchasing acreage in the Permian basin in a bid to expand its drilling portfolios in West Texas and New Mexico. In spite of the drop in oil prices, the value of the land in the Permian basin has shot up to record highs amid a bout of land buying as companies prepare for a rebound.

Though Exxon Mobil had considerable acreage in the Permian basin prior to the deal, it was far smaller than that of peers like Chevron Corp. CVX and Occidental Petroleum Corp. (OXY - Free Report) .

In just the past two days, the acquisitions in the area including the Exxon Mobil deal reached a value of about $10 billion. On Jan 16, Noble Energy Inc. NBL said it would pay $2.7 billion to buy West Texas producer Clayton Williams Energy Inc. The following day, WPX Energy Inc. announced a $775 million deal to enhance its operations in the area.

ExxonMobil currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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