ExxonMobil May Sell U.K. North Sea Assets

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--After 50 years in the U.K.'s North Sea, ExxonMobil Corporation (NYSE:XOM) (ExxonMobil) (Irving, Texas) is investigating selling its oil and gas assets as part of a $15 billion divestment plan.

The assets could fetch up to $2 billion according to consultancy Wood Mackenzie and would mark part of a larger withdrawal from the European oil and gas sector. ExxonMobil has declined to comment, but reports suggest that some exploratory talks have taken place with potential buyers. In June, the company confirmed that it was looking into selling some or all of remaining shares in oil fields in the Norwegian North Sea, valued at up $4 billion.

According to its website, ExxonMobil produces roughly 80,000 barrels of oil and 441 million cubic feet of gas a day from its U.K. North Sea assets. It operates about 40 producing offshore oil and gas fields in the North Sea, many of which are operated by Shell U.K. Exploration and Production as part of a joint operation. Both ExxonMobil and Shell have declined to comment on the proposed sell-off.

Neivan Boroujerdi, principal analyst for North Sea upstream at Wood Mackenzie, commented on the reports: "A proposed U.K. exit was expected. We value the portfolio at around US$2 billion. Combined with its Norwegian assets, which ExxonMobil recently announced its intention to market, could see the super-major reach one-third of the way to meeting its $15 billion divestment target."

He added: An active phase of portfolio high-grading will complement and strengthen its aggressive investment-led strategy, centred around its flagship projects in Guyana, U.S. tight oil and liquefied natural gas. Nevertheless, the U.K. business is attractive. It is highly cash generative, with operating costs around half of the U.K. average. Most of the value lies in three main hubs: Penguins, Shearwater and Gannet. Focus for any new buyer will be on increasing recovery and pushing out abandonment costs. But given the portfolio is operated through a 50-50 joint venture with Shell, investment plans will need to be aligned with the Anglo-Dutch major, which is juggling opportunities in its own global portfolio."

In 2017, ExxonMobil sold its upstream business in Norway to private equity firm HitecVision and oil company Point Resources for an undisclosed sum. This included a significant package of operated producing assets on the Norwegian Continental Shelf [54,000 barrels of oil equivalent per day, field assets such as platforms and floating production storage and offloading vessels (FPSOs) as well as the company's office building in Sandnes, near Stavanger and 300 employees.

ExxonMobil is pouring increased investment into the Permian Basin and U.S. liquefied natural gas production. Production from the Permian was 274,000 oil equivalent barrels per day, up 90% from a year earlier, the company said last week. Industrial Info is tracking $79 billion in project activity by ExxonMobil.

ExxonMobil's European withdrawal is part of a larger retreat from the region by U.S. oil and gas companies. Last year, Industrial Info reported that Norway's Equinor (NYSE:EQNR) (Stavanger, Norway), agreed to purchase Chevron's (NYSE:CVX) (San Ramon, California) 40% stake in the Rosebank oilfield west of Scotland's Shetland Islands for an undisclosed sum as the company continued its exit from the North Sea. In July, Chevron announced plans to sell its U.K. Central North Sea fields, including the Alba, Alder, Britannia (and satellites), Captain, Elgin/Franklin, Erskine, and Jade fields. For additional information, see October 9, 2018, article - Equinor Buys Chevron's 40% Stake in Major U.K. Oil Field.

In April, fellow U.S. producer ConocoPhillips (NYSE:COP) sold its North Sea fields to Aberdeen-based Chrysaor $2.67 billion, focusing instead on its U.S. shale business.

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