Exxon Mobil Corporation XOM, the U.S. oil and gas giant, has failed to find commercially feasible natural gas reserves at an exploratory well, namely Elektra-1, which was drilled offshore Cyprus earlier this year. Earlier, XOM had mentioned that it collected extensive three-dimensional (3D) seismic data and discovered several large prospects offshore Cyprus, including the Electra prospect. Based on the evaluation of the seismic data, the company stated that the Electra prospect was promising.

Elektra-1 Falls Short of Commercial Viability

The U.S. energy major recently completed drilling activities at the Elektra-1 well. The Ministry of Energy, Commerce and Industry in Cyprus noted that preliminary assessments and the data collected from the exploratory well indicated that the gas reserves at the prospect were commercially infeasible for development. However, the ministry also noted that XOM’s initial assessments, following the drilling operations, have shown promising results. The initial results of the evaluation confirm the presence of a hydrocarbon system alongside high-quality reservoirs.

Consortium Eyes Pegasus-1 Well After Elektra-1 Setback

The drilling operations at the Electra prospect were conducted by a consortium comprising ExxonMobil Exploration and Production Cyprus, and QatarEnergy International E&P LLC, with the former acting as the operator. The Elektra-1 well was drilled in Block 5 of the Exclusive Economic Zone (“EEZ”) in Cyprus. ExxonMobil holds exploration licenses in two offshore blocks in Cyprus, with QatarEnergy as its partner.

The country's energy ministry has stated that the information collected while conducting drilling operations will be analyzed further and considered by the consortium before determining its future plans in Block 5. The consortium will now focus on drilling another exploratory well, Pegasus-1, located in a different offshore block in Cyrus’ EEZ.

The results pose a major setback for Cyprus as the country is yet to produce natural gas from its offshore discoveries. Cyprus is trying to secure its position as an alternative natural gas supplier to the European Union (EU). After Russia’s invasion of Ukraine in 2022, many European nations are trying to diversify their gas supply sources, and the Mediterranean region has attracted significant attention due to its offshore gas reserves. However, the initial assessment of the Elektra-1 well has dealt a blow to Cyprus’ ambitions to establish itself as an alternative supplier and contribute to the EU’s energy security.

XOM’s Zacks Rank and Key Picks

XOM currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the energy sector are Archrock Inc. AROC, Nine Energy Service NINE and Kinder Morgan, Inc. KMI. While Archrock currently sports a Zacks Rank #1 (Strong Buy), Nine Energy Service and Kinder Morgan carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues. With natural gas playing an increasingly important role in the energy transition journey, AROC is expected to witness sustained demand for its services.

Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. It operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.

Kinder Morgan is a leading North American midstream player with a stable and resilient business model, largely driven by take-or-pay contracts. KMI’s stable business model shields it from commodity price volatility, resulting in predictable earnings and facilitating reliable capital returns to its shareholders.

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