Exxon & TOTAL To Drill First Deepwater Well Offshore Mexico

Per Mexico's National Hydrocarbons Commission (CNH), oil supermajors Exxon Mobil Corporation (NYSE:XOM) and TOTAL S.A. (NYSE:TOT) are expected to jointly drill the first deepwater well at the Etzil structure, located in Block 2 of the Perdido Fold Belt, offshore Mexico in October 2018. The well was assigned to the companies in late 2016 as part of the Mexican hydrocarbon auction, which marked the country's energy reform.

About Etzil

The companies believe that there is a 50% chance that the 80-square kilometer deepwater structure may contain around 2.7 billion barrels of oil equivalent proved and probable reserves. The CNH estimates the oil majors to recover about 916 million barrels of oil equivalent (BOE) from the structure, which is operated by TOTAL. Both Exxon Mobil and TOTAL own 50% stake each in the project. Among Mexico’s auctioned deepwater wells, the Etzil structure is assumed to boast the highest geological success rate at 34%.

Partnership’s Plans

The drilling program is divided into two phases. In the first, Etzil-1 will be drilled at 7,000 meters deep. This will be followed by the second phase, wherein another well will be drilled alongside Etzil-1, by the end of 2020 at a depth of 4,900 meters. The partnership is expected to invest at least $129 million during the anticipated four-year long exploration period.

Exxon Mobil and TOTAL – both carrying a Zacks Rank #3 (Hold) –will conduct several geological studies to de-risk the structure, which will also enable the partnership to identify any other potential exploration sites in the 2,900 square kilometers block. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Developments

Notably, TOTAL with Statoil (OL:STL) ASA (NYSE:STO) and BP (LON:BP) P.L.C. (NYSE:BP) have recognized two other deepwater structures located in the Cuenca Salina basin of Mexico namely Hunab and Serrano, containing 397 million BOE and 325 million BOE, respectively.

There are also many other potential exploration targets in the country, currently under recce by oil and gas companies like Chevron (NYSE:CVX), Inpex, CNOOC, et al following the success of energy reform in Mexico that ended the 75-year monopoly of Pemex, the state-owned oil company.

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