(XOM) Exxon Mobil Makes Giant Gulf of Mexico Discovery

Exxon Mobil Corporation (XOM) announced the discovery of oil and gas in three major blocks in the deepwater Gulf of Mexico, marking the company’s first deepwater exploration since the end of the drilling moratorium in the region. The wells are estimated to hold approximately 700 million barrels of oil equivalent in combined reserves.

The U.S. government had halted drilling activities in the Gulf area, following the blowout of Macondo well — operated by BP plc (BP) — in April, 2010. The suspension was withdrawn in November, 2010.

Located at almost 250 miles to the southwest of New Orleans in water depth of 7,000 feet, the KC919-3 wildcat well confirmed the presence of more than 475 feet of net oil pay plus a minor amount of gas.

Through earlier drilling, Exxon had encountered 550 feet of net oil pay and a minor amount of gas at the Hadrian North field (KC919 and KC918 wells) and about 200 feet of natural gas pay at the Hadrian South prospect.

Exxon acts as the operator of all the wells – situated in the Keathley Canyon – with 50% working interest. The American units of Italy’s Eni SpA (E) and Brazilian company Petrobras (PBR) share the remaining stake equally.

Exxon management remains highly optimistic about the discovery – one of the largest in the Gulf of Mexico in the last decade – and plans to work closely with other companies through joint venture for the maximum development and utilization of the resource.

We are maintaining our long-term Neutral rating on the stock. Exxon currently retains a Zacks #3 Rank, which translates into short-term Hold recommendation.

BP PLC (BP): Free Stock Analysis Report

ENI SPA-ADR (E): Free Stock Analysis Report

PETROBRAS-ADR C (PBR): Free Stock Analysis Report

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

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