Exxon Fields Could Witness Strike - Analyst Blog

Oil major, ExxonMobil Corporation XOM, which operates a few oil fields in the Norwegian North Sea, seems to be braced with trouble. The above-mentioned oil fields are under risk of being shut down due to strike if management fails to negotiate with the workers' union regarding pension.

If the strike takes place, it will reduce daily output by 50,000 barrels of crude. According to labor union SAFE, about 190 ExxonMobil workers in Norway would go on strike if necessary, which would affect production at the Ringhorne, Jotun and Balder fields.

The union wants the company to give better pension terms to 31 workers and grant them a lower retirement age to bring them on par with other offshore employees.

The parties are likely to meet before a state mediator in late May or in June. If the meeting is unsuccessful and followed by a strike, the Norwegian government has the right to enforce a deal and compel employees to return to work.

Notably, earlier this month, talks between oil firms and two key labor unions failed. This has raised the possibility of a strike like that in 2012, thereby making investors concerned. The strike in 2012 had continued for 16 days across Norway's oil sector and cut production by 13%, apart from increasing oil prices over $100 a barrel.

However, the latest dispute will expectedly not have that significant an impact, as the ExxonMobil oilfields produced only 46,000 barrels per day in 2013. However, SAFE union has stated that the strike could be more widespread, if the required demands remained unfulfilled.

ExxonMobil holds 100% interest in the Balder and Ringhorne fields, while having a 45% stake in Jotun. The other partner in Jotun is Dana Petroleum plc that holds 45% stake. The company has 77.4% stake in Ringhorne East, which is tied to the Balder and Jotun installations.

The union is targeting ExxonMobil as it has not yet executed an early-pension plan for 31 employees who are members of the union. ExxonMobil has declined to comment on any moves from its side.

At present, ExxonMobil carries a Zacks Rank #3 (Hold). Some better-ranked oil and gas stocks worth considering include Encana Corp ECA, EPL Oil & Gas, Inc. EPL and Pembina Pipeline Corporation PBA. All of these stocks sport a Zacks Rank #1 (Strong Buy).