Exxon to Sell 100% Stake in Nigerian Offshore Shallow Water Business

Exxon Mobil Corporation (NYSE: XOM) has agreed to dispose its shareholding in Mobil Producing Nigeria Unlimited (MPNU) for $1,283 million, along with contingent consideration of up to $300 million. The buyer in the transaction is Seplat Energy Offshore Limited, a wholly-owned affiliate of Nigerian energy company Seplat Energy Plc.

Shares of Exxon increased 2.7% to close at $77.84 on Friday.

Exxon is an integrated oil and natural gas company with expertise in exploration, production, transport, and sales stages. Among its other product offerings are petrochemical, petroleum, and multiple specialty products. The company is based in Irving, TX.

Details of the Deal

Per the agreement signed, Exxon will be selling its offshore shallow water business in Nigeria. It has a 40% stake in four oil mining leases (offshore), which includes over 90 offshore and shallow water platforms and 300 producing wells, and a Nigerian export facility, the Qua Iboe Terminal. The company also has a 51% stake in Natural Gas Liquids Recovery Plants and Bonny River Terminal.

The assets to be sold come under the ambit of Exxon’s Upstream segment. This segment deals with the production of natural gas and crude oil. In 2021, Exxon’s oil-equivalent production was 3,712 thousand oil-equivalent barrels daily, down 1.3% year-over-year.

Interestingly, Exxon will continue to operate its Nigerian deepwater assets, including Esso Exploration and Production Nigeria (Deepwater) Limited and Esso Exploration and Production Nigeria Limited’s stakeholding in Bonga, Erha, and Usan developments.

Contingent upon receipt of regulatory approvals and satisfaction of other closing conditions, the parties to the transaction anticipate completion in the second half of 2022.

MPNU, upon its separation from Exxon, will work as Seplat Energy’s standalone subsidiary.

Management’s Comments

The President of ExxonMobil Upstream Oil and Gas, Liam Mallon, said, “This sale will allow us to prioritize competitively advantaged investments in our strategic assets, and it supports the Nigerian government’s efforts to grow its oil and gas operations.”

Meanwhile, Seplat Energy’s CEO Roger Brown said, “The acquisition is a perfect fit with our strategy to build a sustainable business and deliver energy transition in Nigeria. Our financial strength has enabled us to attract high quality local and international capital providers to fund this transaction without diluting our existing shareholders and reflects our deliberate approach to capital allocation.”

Another Important Event

In a separate release on Friday, Exxon communicated its decision to make an incremental investment of $400 million in its LaBarge, WY-based facility. This effort will enable the company to capture an additional 1.2 million metric tons of carbon.

Annual carbon capture at LaBarge facility is 6-7 million metric tons.

Wall Street’s Take

Recently, Manav Gupta, an analyst at Credit Suisse, maintained a Hold rating on Exxon, while increasing the price target to $90 (15.62% upside potential) from $85.

Another analyst, Doug Leggate of Bank of America Securities reiterated a Buy rating on the stock with a price target of $105 (34.89% upside potential).

The stock has a Moderate Buy consensus rating based on 9 Buys and 9 Holds. The average Exxon price target of $84.89 suggests 9.06% upside potential from the current levels. Over the past year, shares of Exxon have gained 45.7%.

Smart Score

Exxon scores a 7 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has the potential to perform in line with the market.

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