ExxonMobil’s South America bonanza grows

Darren Woods, Chairman and Chief Executive Officer - Exxon Mobil Corporation
Darren Woods, Chairman and Chief Executive Officer – Exxon Mobil Corporation

(Forbes) After announcing discovery after discovery from its massive Stabroek Block offshore the tiny South American nation of Guyana over the past three years, ExxonMobil announced on Friday that it has struck South American oil and gas once again, this time off the coast of Guyana’s neighboring country, Suriname.

In a statement, ExxonMobil Senior Vice President of exploration and new ventures, Mike Cousins, said “Our first discovery in Suriname extends ExxonMobil’s leading position in South America, building on our successful investments in Guyana, we will continue to leverage our deepwater expertise and advanced technology to explore frontier environments with the highest value resource potential.”

The company’s release also noted that “ExxonMobil said in November that it is prioritizing near-term capital spending on advantaged assets with the highest potential future value. The Suriname discovery further strengthens ExxonMobil’s industry-leading portfolio along with its other recent exploration success in the same basin in Guyana.”

The company’s exploration area offshore Surname – Block 52 – is, like Stabroek, massive, consisting of 1.2 million acres, or about 4,749 square miles. The block is roughly 75 miles offshore in the Atlantic Ocean. The discovery well is named the Sloanea-1 exploration well, which is operated by Malaysia’s Petronas, which owns a 50 percent working interest, with ExxonMobil owning the remaining 50 percent.

Block 52 is similar in scale to the adjacent, 1.4-million-acre Block 58, from which Apache Corp., in partnership with Total, has announced a series of prolific discoveries over the past year. Apache and Total also own the lease rights on Block 53, which consists of an additional 870,000 acres. The partners have yet to drill a test well on Block 53.

For Exxon, the announcement of this Block 52 find comes at a fortuitous time, just days after it had announced a significant write-down of asset value. On December 1, the company announced it would write down the value of its domestic and international dry natural gas holdings by $17-$20 billion, and that it would focus its future capital priorities on high-potential assets like its holdings in Guyana and Suriname, along with its oil-rich leasehold in the Permian Basin of West Texas and Southeast New Mexico.

In a release, the company said that it would remove its less strategic dry gas assets from its development planning over the next five years, including assets in “the Appalachian and Rocky Mountains, Oklahoma, Texas, Louisiana and Arkansas in the United States, and in western Canada and Argentina.” That decision was the result of an overall re-evaluation and high grading by the company of its entire portfolio, which it previewed in early November.

“Recent exploration success and reductions in development costs of strategic investments have further enhanced the value of our industry-leading investment portfolio,” said Darren Woods, chairman and chief executive officer for Exxon Mobil Corporation. “Continued emphasis on high-grading the asset base – through exploration, divestment and prioritization of advantaged development opportunities – will improve earnings power and cash generation and rebuild balance sheet capacity to manage future commodity price cycles while working to maintain a reliable dividend.”

The de-emphasis of its dry-gas portfolio and this new find in Suriname demonstrate that the company’s new strategic plan is up and running and already producing results. Whether that will all be rewarded by an investor community increasingly more interested in rewarding climate action than producing the energy the world needs remains to be seen.

By David Blackmon, Forbes Senior Contributor