As peace negotiations between the United States and Iran stall, Occidental Petroleum (OXY) saw its stock rise on Monday, along with oil prices.
According to relevant reports, the negotiations have broken down, prompting oil prices to jump by approximately 5%. Iran has stated that it will resume efforts to block shipping traffic through the Strait of Hormuz. This critical waterway carries about 20% of the world’s crude oil and liquefied natural gas (LNG) transport. Iran and its allies have also threatened to block other vital shipping channels.
Industry experts have warned that energy prices could soar if these shipping disruptions are not resolved. Neil Chapman, Senior Vice President at Exxon Mobil, believes that oil prices could reach $160 per barrel within the next few weeks as inventories are gradually depleted.
To address the shortfall in energy transport from the Middle East, governments in Europe and Asia are turning to U.S. producers for oil and LNG supplies. U.S. oil exports surged more than 30% in April compared to before the Iran conflict broke out in February, reaching 5.2 million barrels per day. As one of the largest independent oil and gas producers in the United States, Occidental Petroleum is helping to meet global demand for reliable energy supplies.
Occidental Petroleum is also acquiring a 10% interest in a large deepwater exploration block near Trinidad and Tobago from Exxon Mobil (XOM). The oil major previously held 100% interest in the Ultra Deep 1 block (referred to as UD1). Exxon Mobil originally obtained the block last year through an agreement with the government of Trinidad and Tobago.
Exxon Mobil is currently conducting seismic surveys in the area, which are expected to be completed by the end of this year. Exxon Mobil now plans to invest $42 million in seismic data collection and up to two exploration wells, with drilling possibly beginning within six months of completing the seismic studies. If the block proves to be as resource-rich as Stabroek, Exxon Mobil believes that full development could require an investment of $21.7 billion in the future. Selling a partial interest in the block to Occidental Petroleum will help Exxon Mobil reduce exploration and development costs and risks.
Exploration is the lifeblood of oil and gas companies. They need to regularly replenish resources to offset production declines and reserve depletion across their portfolios. Acquiring a 10% interest in the UD1 block provides Occidental Petroleum with an exploration project offering high-return potential.
Occidental Petroleum has a vast portfolio of exploration prospects. Last year, the company signed an agreement with the Omani government to extend its concession in Block 53. The agreement added more than 800 million barrels of potential resources in the country. Earlier this year, Occidental Petroleum, together with partners Chevron (CVX) and Woodside Energy, made an oil discovery in the Bandit prospect in the U.S. Gulf of Mexico. These and other areas will drive Occidental Petroleum’s growth in the coming years.
