Exxon Mobil Corporation XOM is planning to withdraw its oil operations in Equatorial Guinea and exit the country after its license expires in 2026, per a report by Reuters.
The move reflects the company’s strategy to reduce crude production in West Africa, which is a high-cost and carbon-intensive region. It aims to invest in more lucrative projects in the Americas.
ExxonMobil reduced crude production in West Africa to less than 15,000 barrels of oil per day (bpd) through the existing Serpentina floating production unit. Europe is the primary recipient of Equatorial Guinea’s oil exports.
ExxonMobil’s crude production in Equatorial Guinea peaked at more than 300,000 bpd eight years ago. Production has been declining since then. Last year, the company’s production in West Africa totaled 93,000 bpd, with about 45,000 bpd extracted in Equatorial Guinea.
Per OPEC estimates, production in the Americas will increase to 28 million bpd next year as a result of declining crude production in West Africa. A significant portion of the escalation comes from the United States, Canada, Guyana and Brazil, wherein ExxonMobil increased spending on the production of crude oil.
ExxonMobil plans to decommission Zafiro and move the platform away, likely next month. The company has been attempting to divest its Zafiro operation since 2020. XOM could recover some of Zafiro’s production and reach 25,000-30,000 bpd by adding a third platform, Jade.
Although crude production is sinking, West Africa’s liquefied natural gas (LNG) outlook is growing and hydrocarbon production could increase elsewhere in Africa. Big producers are investing in gas and LNG as Europe looks to replace supplies after sanctions were imposed on Russia.
Rising demand globally could lead to a 30% increase in gas production in Africa by the end of this decade. Libya and Algeria produce crude at lower costs and could attract investments when taken proper measures to reduce emissions from operations. Favorable oil and gas reserves have been found in Namibia, with appraisal wells expected to be drilled in the first half of 2023.
Shares of ExxonMobil have outperformed the industry in the past six months. The stock has gained 12.5% compared with the industry’s 5.9% growth.
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Zacks Rank & Other Key Picks
ExxonMobil currently carries a Zack Rank #2 (Buy).
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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