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Exxon (XOM) to Divest Italian Downstream Assets to Sonatrach

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Exxon Mobil Corporation (XOM - Free Report) recently agreed to divest three fuel terminals and a refinery in Italy to Algerian state-run energy producer Sonatrach. Employees in the facilities will work for the acquirer following the closure of the deal.

Exxon's Italian unit, Esso Italiana Srl will sell its 175,000 barrel a day refinery in Augusta, Sicily and three fuel terminals located in Augusta, Naples and Palermo, along with their related pipelines, to Sonatrach. The financial details of the deal — expected to close by the end of this year — are yet to be disclosed. Around 660 workers currently engaged in the properties will work for the acquirer, following the completion of the divestment.

Divestment Rationale

The oversupplied downstream sector in Italy is a concern for the oil companies operating in the country for quite a while. The divestment of the Italian assets is in line with the company’s prime strategy to focus more on profitable projects. Other oil majors like Royal Dutch Shell plc (RDS.A - Free Report) and TOTAL S.A. (TOT - Free Report) had left the country earlier for similar reasons. Notably, Exxon divested 13 refineries since 2008.

Algeria’s Point of View

Algeria — an Organization of the Petroleum Exporting Countries (OPEC) member — was planning to trim fuel imports. Last year, the country paid around $2.5 billion for fuel imports, which shoot up from $800 million in 2016 due to refining problems. Buying Exxon's assets will help the Algerian company refine its own crude and then bring back the products to the country. The deal is expected to reduce Algeria's dependency on foreign supplies.

Notably, buying Exxon's asset marks the first international investment in refining for Algeria. Sonatrach has further plans of starting a petrochemical project in Algeria with TOTAL.

Price Performance of Exxon

Irving, TX-based ExxonMobil, the world’s largest publicly traded oil and gas firm, has lost 3.3% of its value in the last year against the 16.3% rise witnessed by the industry it belongs to.

Zacks Rank and Stock to Consider

Currently, ExxonMobil carries a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for another top-ranked stock in the same space like Nine Energy Service, Inc. (NINE - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Nine Energy Service is an onshore service provider. For 2018, the bottom line is likely to be up 33.4%. In the last reported quarter, the company delivered a positive earnings surprise of 6.3%.

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