Exxon Expands Fracking Operations in Europe
Exxon Mobil (NYSE:XOM) has been expanding its footprint on shale exploration efforts in Europe. The company recently inked a pact with Ukrainian state oil & gas firm Naftogaz to explore and develop Ukraine’s shale gas reserves. [1] The move comes at the back of it completing its first hydraulic fracturing operation in neighboring country Poland last week. [2] Shale is one of the alternatives that European countries are considering to reduce their dependence on Russian natural gas production. The oil and gas exploration sector also has players such as BP (NYSE:BP), Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP) and Anadarko Petroleum (NYSE:APC).
We have a $93 price estimate for Exxon Mobil which is at a 25% premium over its current market price.
Shale Opportunity in Europe
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Ukraine is estimated to hold around 42 Tcf of gas in its shale deposits according to the EIA. [1] In 2009, Ukraine produced around 715 Bcf of natural gas while its consumption stood at 1,559 Bcf in the same period. Naftogaz has been scouting for partners to help it develop its own hydrocarbon deposits to boost local production and has signed similar deals with companies such as Total (NYSE:TOT) and Halliburton (NYSE:HAL). The details of the company’s latest agreement with Exxon Mobil have not been disclosed.
Exxon has also been active in Poland where it is looking to start its second hydrological fracturing shale gas project in the coming week. [2] Poland holds Europe’s largest shale gas reserves with an estimated 148 Tcf of gas locked in its deposits. Overall the country of Poland has awarded around 90 licenses for shale exploration out of which Exxon has acquired 6 giving it access to 2 out of the 3 most attractive shale gas basins in the country.
Exxon’s deepening interest in shale
Exxon announced its entry into shale exploration with a $30 billion takeover of XTO energy last year. The oil major has increased its foothold in the unconventionals sector since then with two more private acquisitions this year and purchase of acreage in the Utica shale play in the U.S. Its latest activity in Europe indicates that the company is looking to leverage its expertise acquired in this sector in international markets as well.
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Notes:- Ukraine signs shale gas deal with ExxonMobil, Reuters [↩] [↩]
- Exxon to start fracking 2nd Polish shale gas well, Reuters [↩] [↩]