U.S. energy major
) has encountered oil in exploration well Mono Arana 1, in the
Middle Magdalena Valley of Colombia on the VMM2 block.
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The Mono Arana 1 well was drilled to evaluate the hydrocarbon
potential of a shallow conventional Tertiary Lisama sandstone
reservoir and deeper shale and carbonate reservoirs in La Luna
and Tablazo oil source rocks. The well was spud on Sep 23, to a
depth of 9,942 feet in the Cretaceous La Luna structure.
ExxonMobil owns a 70.1% stake in the VMM2 block, while partners
Canacol Energy Ltd. And and Vetra Exploracion y Produccion
Colombia hold a 20% and 9.9% interest, respectively.
The drilling of the La Luna section shows encouraging results as
around 760 feet of the section witnessed superior hydrocarbon
deposits throughout the entire interval. The associate partners
plan to test results from the La Luna later this year, after
ExxonMobil takes over the operatorship of the Mono Arana 1 well.
Penetrating at roughly 4800 feet deep in the Lisama formation,
the results show that it holds around 85 feet of potential net
oil pay with an average porosity of 21% in three main zones. The
company stated that two intervals flowed at a combined average
gross rate of 1,242 barrels of oil per day during a short-term
test in the tertiary Lisama sandstone.
The associated partners in the venture expect to evaluate and
bring into commercial production the Lisama oil discovery in
2014. Further appraisal of the La Luna structure is also designed
for the second quarter as it encountered high pressure while
drilling the operation.
Although we remain skeptical due to ExxonMobil's continued
disappointing production trend, we expect major capital projects
and upstream ventures to drive 2013 production volume.
Additionally, the start-ups of Kearl and Kashagan and the
production ramp up from 2012 start-ups in Angola and Nigeria are
also added incentives.
In the third quarter, ExxonMobil's production level decreased
7.5% year over year. The company also reiterated that it expects
its oil and gas production to decline 3% in 2012, after a modest
rise of 1% in 2011. We see ExxonMobil struggling to consistently
grow production over time.
ExxonMobil retains a Zacks Rank #3 (Hold), which is equivalent to
a short-term Hold rating. Meanwhile, there are certain other
companies in the oil and gas sector that are expected to perform
well and are worth buying now. These include
Hornbeck Offshore Services Inc
) - both with a Zacks Rank #2 (Buy), while
Royal Dutch Shell Plc
) retains a Zacks Rank #1 (Strong Buy).