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ExxonMobil (XOM) Acquires Drilling Rights in Arkansas Land

Exxon Mobil Corporation XOM acquired drilling rights to a significant portion of Arkansas land from which it plans to produce lithium, per a report by The Wall Street Journal.

Lithium is an essential component in batteries for electric cars, cellphones and laptops. Lithium is far removed from the fossil-fuel business, which has driven ExxonMobil’s profits for more than 100 years. The company can commence drilling activities on the Arkansas prospect in the coming months and expand its operations if proven profitable.

ExxonMobil acquired 120,000 gross acres in the Smackover formation of southern Arkansas for more than $100 million from exploration company, Galvanic Energy. The Arkansas prospect can contain 4 million tons of lithium carbonate equivalent, which is sufficient to power 50 million electric vehicles (EVs).

The latest initiative does not indicate a significant strategic transformation for ExxonMobil, as it believes that demand for hydrocarbons will remain steady for decades. However, the company wants to gain a foothold in a region, which is expected to contain vast lithium reserves to produce the mineral and to test the feasibility of extraction technologies.

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Lithium production will also expand ExxonMobil’s portfolio and expose it to a rapidly-growing market. In 2022, ExxonMobil stated that light-duty vehicle demand for internal combustion engine fuels could peak in 2025, while EVs, hybrids, and vehicles powered by fuel cells could expand to more than 50% of new car sales by 2050. XOM is positioning other parts of its business to accommodate EVs.

ExxonMobil plans to invest $17 billion through 2027 to low-carbon emissions and develop low-carbon technologies. Unlike other integrated energy majors, ExxonMobil will limit its low-carbon investments in technologies that threaten its core oil-and-gas business.

In the 1970s, ExxonMobil played a crucial role in the establishment of the lithium industry. Producing lithium from regions such as Arkansas can help meet the domestic requirements of the United States and compete globally.

Price Performance

Shares of ExxonMobil have outperformed the industry in the past six months. The stock has lost 6.4% compared with the industry’s 6.5% decline.

 

Zacks Investment Research
Zacks Investment Research


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Zacks Rank & Key Picks

ExxonMobil currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at the following companies that presently buy a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enterprise Products Partners LP EPD reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, beating the Zacks Consensus Estimate of 62 cents. Strong quarterly earnings were primarily driven by higher contributions from the Natural Gas Pipelines & Services businesses.

In the first quarter, Enterprise Products Partners generated an adjusted free cash flow of $1,347 million against a negative $1,618 million in the year-ago quarter. EPD retained $863 million of distributable cash flow in the March-end quarter.

Dril-Quip, Inc. DRQ reported a first-quarter adjusted loss of 1 cent per share, narrower than the Zacks Consensus Estimate of a loss of 2 cents. Strong quarterly results were supported by improved performances of key offshore markets and some reemerging areas.

For 2023, Dril-Quip expects product bookings to increase 10-20% year over year. The company reported net bookings of $53.5 million for the first quarter. DRQ’s first-quarter backlog rose 6% year over year due to the increase in product bookings following improvement in market conditions.

Motor fuel retailer Murphy USA Inc. MUSA announced first-quarter 2023 earnings per share of $4.80, which beat the Zacks Consensus Estimate of $4.06. The outperformance can be attributed to higher volumes and retail fuel contribution.

MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

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