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ExxonMobil, Petrobras Ink MoU to Appraise Business Prospects

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ExxonMobil Corporation (XOM - Free Report) inked a memorandum of understanding (MoU) with Petrobras (PBR - Free Report) relating to a strategic alliance to discover and appraise business opportunities.

The companies will assess areas of mutual interest by engaging respective expertise in all segments of the oil and gas production value chain. The agreement includes cooperation in exploration and production of gas and chemicals in and outside Brazil.

These deals form an important part of Petrobras’ Business and Management Plan 2017-2021, as they fetch significant benefits including risk and technology sharing, increased investment capacity in the oil and gas chain as well as fortifying corporate governance.

In case of ExxonMobil, this agreement demonstrates and emphasizes strategic relationship with Petrobras. The company plans to extend the relationship and strengthen business in Brazil.

ExxonMobil and Petrobras have jointly obtained six offshore blocks in the Campos Basin in the Brazil National Agency of Petroleum’s 14th tender round in September 2017.

In a separate announcement, ExxonMobil concluded the purchase of 25% indirect interest in Mozambique’s gas-rich Area 4 block from Eni SpA (E - Free Report) . Through this transaction, ExxonMobil also assumed responsibility for midstream operations.

ExxonMobil and Eni have bifurcated their operations, which will enable them utilize the best skills and practices. ExxonMobil will manage construction and operation of all future natural gas liquefaction and related facilities, while Eni will head the Coral floating LNG project and all upstream operations.

Mozambique has vast supplies of natural gas and is considered the world’s fastest-growing major fuel source. The deepwater Area 4 block is estimated to hold about 85 trillion cubic feet of natural gas in place.

On completion of this transaction, ExxonMobil will hold a 35.7% interest in Eni East Africa S.p.A. (to be renamed Mozambique Rovuma Venture S.p.A.). Eni East Africa holds an interest of 70% in Area 4. The other partners include Eni and CNPC, holding 35.7% and 28.6%, respectively. The co-partners in Area 4 are Empresa Nacional de Hidrocarbonetos E.P., Kogas and Galp Energia, holding 10% each, respectively.

Price Movement

Shares of the company have returned 3.6% compared with the industry’s rally of 7.5% in the last three months.


Zacks Rank & Key Picks

ExxonMobil currently carries a Zacks Rank #3 (Hold). A better-ranked player in the energy sector includes Holly Energy Partners, LP (HEP - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Holly Energy Partners, owner and operator of refined product pipelines and terminals, delivered an average positive earnings surprise of 57.14% in the preceding quarter.

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