ExxonMobil's (XOM) Royalty Payments From Guyana To Double

Guyana’s government recently agreed to double ExxonMobil Corporation’s (NYSE:XOM) royalty payments on oil retrieved from its offshore waters. The government said that the energy giant will receive its production license this month.

Over the past few years ExxonMobil has made several discoveries in Guyana’s Stabroek Block, giving the country a window to the oil world.

About the Deal

The government assured that ExxonMobil will receive a royalty of 2% of gross earnings and 50% of the profits after production begins. The company's expected total investment in the project is $5 billion. Once production starts, 75% of the total revenue will be used to repay ExxonMobil for its investment in exploration in offshore waters of Guyana and preparation for production. The remaining 25% will be split equally between the country and the company.

Project Details

The project will kick off soon after the receipt of the license and production is expected to begin in 2020. Initially, the company expects production rate to be 100,000 barrels of crude per day.

The government is reviewing ExxonMobil’s applications before providing the environmental permit and production license. ExxonMobil (45%) is the major stakeholder in the project with partners Hess Corporation (NYSE:HES) and CNOOC Limited (NYSE:CEO) holding 30% and 25% stake, respectively.

The company is optimistic on the Guyana project as it promises a reserve of more than 1.5 billion barrels of oil equivalent mixed with natural gas. The project is expected to commence in two phases. The company will use proprietary seismic imaging technology for the exploration program.

About the Company

Irving, TX-based ExxonMobil is one of the world’s largest publicly traded oil company, engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Approximately 83% of Exxon’s earnings come from its operations outside the U.S. The company divides its operations mainly into three segments: Upstream, Downstream and Chemicals.

Price Performance

In the last one month, ExxonMobil’s shares fell 4.1%, while the Zacks categorized Oil and Gas – International - Integrated industry witnessed a loss of 1.6%.

Zacks Rank and Stock to Consider

ExxonMobil presently has a Zacks Rank #3 (Hold). A better-ranked stock in the oil and energy sector is Delek US Holdings, Inc. (NYSE:DK) . It flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek US Holdings’ sales for 2017 are expected to increase 71.65% year over year. The company has a four-quarter average positive earnings surprise of 60.68%.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>