ExxonMobil, BHP Billiton To Terminate Marketing JV In 2019

ExxonMobil Corporation (NYSE:XOM) is likely to end the five-decade old marketing joint venture with BHP Billiton (LON:BLT) Ltd due to concerns raised by the Australian Competition and Consumer Commission (ACCC) relating to gas supply and rising prices.

In 2016, the ACCC expressed alarm about the companies’ market on the Gippsland Basin, the biggest producer in the country’s southern states. The joint venture is the biggest producer in the Gippsland Basin. It was rumored that ExxonMobil and BHP Billiton will be compelled to end thejoint venture and sell gas separately.

The companies argued that the joint venture bolstered the economy and the termination will make new investment and supplies in Gippsland Basin more complex.

The primary concern was that big gas buyers were receiving not more than two offers for multi-year deals. This will be possible only when ExxonMobil and BHP Billiton start marketing gas separately.

Consequently, ACCC announced that the companies willsell their gasseparately from the Gippsland Basin from 2019.Legal actions can be taken if the partners fail to comply with the decision.

An analyst at Wood Mackenzie believes that separate marketing of the gas will notaffect the domestic gas prices. The liquefied natural gas export market decides prices.

In 2018, yield from the Gippsland Basin venture is projected to drop to 244 petajoules (PJ) from a record 330 PJ in 2017. The downside will be caused by the drying up of one of biggest fields, earlier than anticipated.

Price Performance

Shares of ExxonMobil have gained 3.4% compared with the industry’s rally of 6.1% in the last three months.

Zacks Rank & Key Picks

ExxonMobil currently carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector include Holly Energy Partners, LP (NYSE:HEP) , SunCoke Energy Inc (NYSE:SXC) and Northern Oil and Gas Inc (NYSE:NOG) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Holly Energy Partners, owner and operator of refined product pipelines and terminals, delivered an average positive earnings surprise of 57.14% in the preceding quarter.

SunCoke Energy produces metallurgical coke in the United States. The company delivered an average positive earnings surprise of 113.52% in the last four quarters.

Northern Oil and Gas, based in Minnetonka, MN, is an independent energy company. The company delivered an average positive earnings surprise of 175.00% in the last four quarters.

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