One of the challenges faced by Big Oil is finding new oil reserves in countries that are not hostile to US concerns.
Stability of countries containing oil reserves is also an issue. Problems in the past year in the Middle East, Nigeria and Russia (BP is especially feeling the heat in Russia ) all underscore the problems faced by Big Oil with regard to locating new sources of oil. This is why a $75 million investment by Exxon Mobil (XOM) in Hungary looks to be a good move for the company. Yahoo! Finance reports on XOM’s latest oil exploration deal:
The deal is between Falcon subsidiary TXM Exploration and Production LLC and Exxon Mobil affiliate Esso Exploration International Ltd. Exxon will have a 67 percent stake in a contract area licensed by Falcon covering about 184,300 acres.
Oil prices are increasingly volatile and oil reserves are increasingly difficult to come by. This move by XOM, if oil is found and production can be implemented, would be yet another savvy move by the world’s largest company by value. Even though XOM (like the entire energy sector — the entire stock market for that matter) was down on Friday, the company still remains fairly strong in fundamentals. Most of the company’s business decisions are solid and focused as much as possible on the bottom line.
And, since focus seems to be more on finding more sources of oil than on looking for alternative forms of energy, XOM is well-placed to continue reaping the benefits of business model that has served it so well for decades.
Disclosure: I do not own XOM.