ExxonMobil to Acquire Superior Graphite Assets, Boost EV Ambitions

Exxon Mobil Corporation XOM, a U.S.-based integrated energy firm, announced that it has signed an agreement with Superior Graphite, a leading private player in the graphite business, to acquire its technology and U.S.-based assets. The agreement signifies ExxonMobil’s entry into the synthetic graphite market.

Details of the Superior Graphite Acquisition

The acquisition involves a production unit in Kentucky and certain international offices of Superior Graphite. It also includes a research center owned by Superior Graphite. Exxon Mobil has mentioned that it intends to build a supply chain for synthetic graphite in the United States. Synthetic graphite is particularly attractive because it is less labor-intensive and of significantly better quality. Furthermore, the company can use carbon-intensive feedstocks from its availablerefining processes to produce the same.

Expanding Role in the EV Battery Supply Chain

Exxon Mobil is aiming to grow its presence in the electric vehicle (EV) market. This deal marks a significant step in its efforts to produce more materials critical to powering EVs and battery production. Additionally, the company is also working on lithium extraction in southwest Arkansas from underground brine. Lithium is a key component in EV batteries. These initiatives underscore XOM’s efforts to advance lower-carbon energy technologies.

Challenges Facing the U.S. Battery Material Market

While ExxonMobil acknowledges that the market for these new products may face ups and downs in the short term, it believes that the demand for batteries, electric vehicles and large-scale energy storage solutions will grow in the long run. However, the U.S. market for battery materials is currently facing several headwinds, including sluggish demand for EVs and an increase in the cost of imported materials due to higher tariffs. Furthermore, a federal tax credit worth $7,500 for the purchase of these vehicles shall expire next month.

Despite all these headwinds, the company intends to proceed with the production of battery materials. The company believes that its differentiated products will be valuable in the market. Its ability to scale investments will strengthen the U.S. domestic supply chain and reduce reliance on imports.

XOM’s Zacks Rank & Key Picks

Currently, XOM carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the energy sector are Repsol S.A. REPYY, Antero Midstream Corporation AM and Galp Energia SGPS SA GLPEY. While Repsol sports a Zacks Rank #1 (Strong Buy), Antero Midstream and Galp Energia carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks Rank #1 stocks here.

Repsol is a global multi-energy company, involved in exploration and production activities as well as refining and marketing petroleum products. The company is also actively involved in transitioning toward cleaner and more sustainable energy solutions. This suggests that Repsol is positioning itself in line with global energy transition needs.

Antero Midstream generates stable cash flow by providing midstream services under long-term contracts with Antero Resources. The company’s higher dividend yield, compared to its sub-industry peers, makes it an attractive choice for investors who seek consistent returns.

Galp Energia is a Portuguese energy company engaged in exploration and production activities. The company’s oil exploration efforts have yielded positive results, particularly the Mopane discovery in the Orange Basin, offshore Namibia. After the initial exploration phase, Galp estimated that the Mopane prospect could hold nearly 10 billion barrels of oil. This discovery allows Galp to diversify its global presence, with the potential to become a significant oil producer in the region.

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This article originally published on Zacks Investment Research (zacks.com).

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