Two of Six Supermajor Oil Companies Selling Billion-Dollar Assets

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Researched by Industrial Info Resources (Sugar Land, Texas)--The new oil fields being explored in North America have paved the way for less dependence on Middle Eastern oil and the opportunity for oil companies to exploit new supplies. With oil prices hovering around $100 per barrel, it would seem that "Big Oil" is making money hand-over-fist. However, the cost per barrel to access the crude oil in these new reserves has shaved oil companies' margins thin. As such, in the past few weeks, two of the world's six "supermajor" oil companies have sold, or announced their intention to sell, billion-dollar assets or shares in projects.

Chevron Corporation (NYSE:CVX) (San Ramon, California) is selling more than $1 billion in midstream assets, including its share in the West Texas Liquid Petroleum Gas (LPG) pipeline, a joint venture with Atlas Pipeline Partners LP (NYSE:APL) (Pittsburgh, Pennsylvania). The pipeline was in the news recently following a rupture, which resulted in a massive fire in Milford, Texas. Prior to this incident, another rupture in the pipeline in 2011 released 13,000 barrels of LPG, which ignited and started a brush fire, causing more than $1.5 million in property damage. The sale of an LPG pipeline is now an anomaly, due to the higher price of natural gas liquids (NGL) and an abundance of them in the Permian Basin and Eagle Ford Shale plays, which has spurred further investment in the regions.

Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) recently announced two large sales. The first was Shell's sale to Kuwait Foreign Oil Exploration (Kuwait City, Kuwait) of Shell's 8% stake in Chevron's Wheatstone offshore liquefied natural gas (LNG) project for $1.1 billion. The anomaly in this sale is not Shell, but Kuwait Foreign Oil. The Middle East is still a seat of much oil and gas development, and Kuwait is a major producer. So Kuwait's increased interest in foreign sources of hydrocarbons is enigmatic.

Shell also has reported that it is fielding offers for a $1 billion share in its recently reversed Houston-to-Houma crude oil pipeline, formerly known as the Ho-Ho pipeline. The pipeline, valued at $3 billion, carries upward of 300,000 barrels per day of crude oil from the East Houston Terminal, which is owned and operated by Magellan Midstream Partners (NYSE:MMP) (Tulsa, Oklahoma) in Texas to Shell's Saint James Terminal in Louisiana. The Houston-to-Houma pipeline has its own leak problem: the pipeline shut down on Monday after a leak in the Channelview, Texas, area was discovered. Crews are currently investigating the leak and no estimate on when it will be restarted has been given.

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