XOM Exxon Mobil Corp

   (FROM THE WALL STREET JOURNAL 3/25/16) 
   By Bradley Olson, Dana Mattioli and Shayndi Raice 

Exxon Mobil Corp. is in advanced talks to acquire a stake in a large Mozambique natural-gas project from Italy's Eni SpA, a sign that major oil companies are again hunting for deals after energy prices crashed in 2014.

The acquisition could be announced in coming weeks, according to people familiar with the matter.

Terms of the deal aren't clear, but one person indicated Exxon is in talks to buy a stake of around 20% from Eni, which owns 50% of the development.

As with all discussions over deals, timing could slip, talks could fall apart at the last minute or the size of the stake could change.

A 20% stake in the concession sold for more than $4 billion in 2013, before energy prices tumbled, would be a drop in the bucket for Exxon, which has a market value of around $350 billion.

The Mozambique Area 4 offshore development is expected to become a major global supplier of liquefied natural gas.

Eni has said Area 4 may hold 85 trillion cubic feet of gas.

The Italian company estimates it may hold enough gas to meet U.S. residential consumption for nearly two decades.

For Exxon, the assets would represent an important move toward adding to oil-and-gas reserves with acquisitions during the downturn in oil prices, a step many analysts have expected it would take as prices fell.

Last year, the Irving, Texas-based company was only able to replace about two-thirds of the oil and natural gas it produced, the first time that has happened in 22 years.

The Mozambique project involves separate natural-gas discoveries in the Indian Ocean that a host of companies want to exploit.

Eni and Anadarko Petroleum Corp. made the original discoveries in the area and agreed last year to coordinate development that is likely to cost in the tens of billions of dollars.

Anadarko owns a 26.5% working interest in Area 1, which is a separate tract not included in the Eni deal under discussion with Exxon Mobil.

Area 1 could hold as much as 75 trillion cubic feet of gas. Partners there include Japan's Mitsui & Co. Anadarko isn't a partner in Area 4.

The projects come at a difficult time for Anadarko and Eni. As oil and gas prices have plunged, Anadarko has said it would cut spending by almost half, complicating its ability to advance the Mozambique development.

Both companies have yet to make a final investment decision on the project. It is unclear how a potential Eni stake sale would impact the funding picture for Anadarko.

The backing of Exxon, which has a AAA credit rating and recently sold $12 billion in bonds to build its acquisition war chest, could be a lifeline for Eni as it seeks to make the discovery viable.

Exxon is said to have an interest in becoming an operator in the development, people familiar with the matter said.

Deal making in the energy industry has been relatively muted because of the downturn in oil and gas prices.

The largest energy deal so far this year is TransCanada Corp.'s agreement to buy Columbia Pipeline Group Inc. for $10.2 billion.

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Eric Sylvers contributed to this article.

(END) Dow Jones Newswires

March 25, 2016 02:47 ET (06:47 GMT)

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