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Business

Exclusive: China’s oil champion prepares Western retreat over sanctions fear

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Men wearing face masks walk past a sign of China National Offshore Oil Corp (CNOOC) outside its headquarters in Beijing, China March 8, 2021. REUTERS/Tingshu Wang

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  • CNOOC preparing to exit Britain, Canada, U.S. -sources
  • Beijing concerned over growing tension with West
  • Production in three countries reached 220,000 boed last year
  • Decision follows CNOOC’s delisting on New York Stock Exchange

LONDON/SINGAPORE, April 13 (Reuters) – China’s top offshore oil and gas producer CNOOC Ltd. (0883.HK) is preparing to exit its operations in Britain, Canada and the United States, because of concerns in Beijing the assets could become subject to Western sanctions, industry sources said.

Ties between China and the West have long been strained by trade and human rights issues and the tension has grown following Russia’s invasion of Ukraine, which China has refused to condemn.

The United States said last week China could face consequences if it helped Russia to evade Western sanctions that have included financial measures that restrict Russia’s access to foreign currency and make it complicated to process international payments. read more

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CNOOC did not immediately comment.

Companies periodically carry out reviews of their portfolios, but the exit being prepared would take place less than a decade after state-owned CNOOC entered the three countries via a $15 billion acquisition of Canada’s Nexen, a deal that transformed the Chinese champion into a leading global producer.

The assets, which include stakes in major fields in the North Sea, the Gulf of Mexico and large Canadian oil sand projects, produce around 220,000 barrels of oil equivalent per day (boed), Reuters calculations found.

Last month, Reuters reported CNOOC had hired Bank of America to prepare for the sale of its North Sea assets, which include a stake in one of the basin’s largest fields. read more

CNOOC has launched a global portfolio review ahead of its planned public listing in the Shanghai stock exchange later this month that is aimed primarily at tapping alternative funding following the delisting of its U.S. shares last October, the sources said. read more

The delisting was part of a move by former U.S. President Donald Trump’s administration in 2020 that targeted several Chinese companies Washington said were owned or controlled by the Chinese military. China condemned the move.

CNOOC is also taking advantage of a rally in oil and gas prices, driven by Russia’s invasion of Ukraine on Feb. 24, and hopes to attract buyers as Western countries seek to develop domestic production to substitute Russian energy.

As it seeks to leave the West, CNOOC is looking to acquire new assets in Latin America and Africa, and also wants to prioritise the development of large, new prospects in Brazil, Guyana and Uganda, the sources said.

‘A PAIN’

CNOOC is seeking to sell “marginal and hard to manage” assets in Britain, Canada and the United States, a senior industry source told Reuters.

All the sources spoke on condition of anonymity because of the sensitivity of the issue.

The industry source said last month that CNOOC’s top management, including chairman Wang Dongjin, found managing the former Nexen assets was “uncomfortable” because of red tape and high operating costs compared with developing nations.

CNOOC has faced hurdles operating in the United States in particular, such as security clearances required by Washington for its Chinese executives to enter the country, the source added.

“Assets like Gulf of Mexico deepwater are technologically challenging and CNOOC really needed to work with partners to learn, but company executives were not even allowed to visit the U.S. offices. It had been a pain all along these years and the Trump administration’s blacklisting of CNOOC made it worse,” said the source.

In its prospectus ahead of the initial public offering, CNOOC said it could face additional sanctions.

“We cannot predict if the company or its affiliates and partners will be affected by U.S. sanctions in future, if policies change,” CNOOC said.

In the United States, CNOOC owns assets in the onshore Eagle Ford and Rockies shale basins as well as stakes in two large offshore fields in the Gulf of Mexico, Appomattox and Stampede.

Its main Canadian assets oil sands projects are Long Lake and Hangingstone in Alberta Province.

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Reporting by Ron Bousso and Chen Aizhu; editing by Barbara Lewis

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Business

EXCLUSIVE China state refiners shun new Russian oil trades, teapots fly under radar -sources

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  • Sinopec, CNOOC, PetroChina, Sinochem refrain from new purchases
  • Worries about sanctions keep state firms at bay
  • Some independent refiners continue ESPO crude imports

SINGAPORE, April 6 (Reuters) – China’s state refiners are honouring existing Russian oil contracts but avoiding new ones despite steep discounts, heeding Beijing’s call for caution as western sanctions mount against Russia over its invasion of Ukraine, six people told Reuters.

State-run Sinopec (600028.SS), Asia’s largest refiner, CNOOC, PetroChina (601857.SS) and Sinochem have stayed on the sidelines in trading fresh Russian cargoes for May loadings, said the people, who all have knowledge of the matter but spoke on condition of anonymity given the sensitivity of the subject.

Chinese state-owned firms do not wish to be seen as openly supporting Moscow by buying extra volumes of oil, said two of the people, after Washington banned Russian oil last month and the European Union slapped sanctions on top Russian exporter Rosneft (ROSN.MM) and Gazprom Neft (SIBN.MM). read more

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“SOEs are cautious as their actions could be seen as representing the Chinese government and none of them wants to be singled out as a buyer of Russian oil,” said one of the people.

Sinopec and Petrochina declined comment. CNOOC and Sinochem did not immediately respond to a request for comment.

China and Russia have developed increasingly close ties in recent years, and as recently as February announced a “no limits” partnership, and China has refused to condemn Russia’s action in Ukraine or call it an invasion. read more

China has repeatedly criticised western sanctions against Russia, although a senior diplomat said on Saturday that Beijing is not deliberately circumventing sanctions on Russia.

China, the world’s largest oil importer, is the top buyer of Russian crude at 1.6 million barrels per day, half of which is supplied via pipelines under government-to-government contracts.

Sources expect China’s state firms to honour its long-term and existing contracts for Russian oil but steer clear of new spot deals.

A drop in China’s imports of Russian oil could prompt its giant state refiners to turn to alternative sources, adding to global supply concerns that had driven benchmark Brent oil prices to 14-year highs near $140 per barrel in early March after Russia invaded Ukraine on Feb. 24. read more

Brent futures have since eased, to below $110, after the United States and allies announced plans to release stocks from strategic reserves. read more

‘RISK CONTROL AND COMPLIANCE FIRST’

Before the Ukraine crisis, Russia supplied 15% of China’s oil imports – half of that via the East Siberian and Atasu-Alashankou pipelines and the rest by tankers from its Black Sea, Baltic Sea and Far East ports.

Unipec, the trading arm of Sinopec and a leading Russian oil buyer, has warned its global teams at regular internal meetings in recent weeks against the risks of dealing with Russian oil.

“The message and tone are clear – risk control and compliance comes before profits,” said one of the sources who was briefed on the meetings.

“Although Russian oil is hugely discounted, there are many issues like securing shipping insurance and payment snags.”

Another of the sources, with a refinery that regularly processes Russian crude, said his plant was told by Unipec to find replacement to maintain normal operations.

“Beyond shipments that have arrived in March and due to arrive in April, there will be no more Russian oil going forward,” said this source.

Unipec loaded 500,000 tonnes of Urals from Russia’s Baltic ports in March, the highest volume in months, supplied by Surgutneftegaz on spot and under a Rosneft export tender that Unipec won for loadings between September 2021 and March 2022, according to traders and shipping data.

Its latest Urals deals will be two April-loading shipments totalling 200,000 tonnes from Russian producer Surgutneftegaz (SNGS.MM), said two traders with knowledge of the deals.

In contrast, India has so far booked at least 14 million barrels, or about 2 million tonnes, of Russian oil since Feb. 24, versus nearly 16 million barrels in all of 2021, according to Reuters calculations. read more

Other state buyers – PetroChina, CNOOC and Sinochem – have shunned Russia’s ESPO blend for May loading, sources said.

Sinopec is facing payment problems even for deals agreed earlier as risk-averse state banks look to scale down financing Russian oil-related deals, the second source said.

TEAPOTS KEEP DEALS ‘UNDER WRAPS’

Sanction worries have driven some independent refiners known as teapots, once a dynamic group of customers consuming about a third of China’s Russian oil imports, to fly under the radar.

“ESPO trading was really slow and secretive. Some deals are being done, but details are kept under wraps. No one wants to be seen buying Russian oil in public,” a regular ESPO dealer said.

To keep oil flowing, these nimble refiners are deploying alternative payment mechanisms such as cash transfer, paying after cargo is delivered and using Chinese currency.

Russian suppliers – Rosneft, Surgutneftegaz and Gazprom Neft, and independent producers represented by Swiss trader Paramount Energy – are expected to ship a record 3.3 million tonnes of ESPO from Kozmino port in May. read more

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Reporting by Reuters, Chen Aizhu and Florence Tan in Singapore; Editing by Himani Sarkar

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Business

U.S. lawmakers slam Big Oil for high gasoline prices

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Gasoline drips out of a nozzle held by a gas station mechanic in Somerville, Massachusetts, U.S., March 7, 2022. REUTERS/Brian Snyder/File Photo

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WASHINGTON, April 6 (Reuters) – Oil executives defended themselves in the U.S. Congress on Wednesday from charges by lawmakers that they are gouging Americans with high fuel prices, saying that they are boosting energy output and no one company sets the price of gasoline.

Lawmakers in the U.S. House of Representatives Energy and Commerce Subcommittee on Oversight and Investigations held the hearing to grill companies on why gasoline prices remain elevated even though prices for crude oil, the feedstock for fuels, have dropped.

U.S. gasoline prices have surged since Russia’s invasion of Ukraine in February and after Western countries slapped sanctions on Moscow’s energy exports. Pump prices hit a record, before inflation adjustments, of $4.33 a gallon on March 11, and since then have slipped about 4% to $4.16 a gallon on Wednesday, according to the AAA motorist group.

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In the same time frame, U.S. gasoline futures have fallen more than 7% to $3.07 a gallon as international crude prices have dropped more steeply,about 8%,to about $103.70 a barrel.

“One of the things that has confused me … and it’s making people mad, is why are gas prices still high?” said U.S. Representative Diana DeGette, a Democrat and chair of the subcommittee. “These prices are constraining our constituents’ budgets and patience.”

Retail gasoline prices exceed wholesale costs due to refining, transport, marketing and taxes, and the gap between the two tends to fluctuate – with retail prices often falling more slowly.

Executives from Exxon Mobil Corp (XOM.N), Chevron Corp (XOM.N), BP America (BP.L), Shell USA , Devon Energy Corp (DVN.N) and Pioneer Natural Resources Co (PXD.N) testified virtually, despite DeGette’s invitations to do so in person.

Chevron’s Chief Executive Mike Wirth said fuel prices are set by market dynamics that companies have little control over.

“Changes in the price of crude oil do not always result in immediate changes at the pump,” Wirth said, adding that “it frequently takes more time for competition among retail stations to bring prices back down at the pump.”

U.S. President Joe Biden has been struggling to tackle rising consumer prices at the pumps and at grocery stores, a vulnerability for his fellow Democrats as they seek to maintain razor-thin majorities in both chambers of Congress in the Nov. 8 elections.

The Biden administration’s sanctions on Moscow include a U.S. ban on Russian energy imports and the president has said the higher fuel prices result partially from Russia’s invasion.

Biden last week urged oil companies to boost output and service American families instead of investors, as he announced a record release of crude oil from strategic reserves. read more

Republicans, including U.S. Representative Morgan Griffith, blamed for high pump prices on Biden’s policies, including a decision to revoke a key permit for the Keystone XL pipeline that would have imported crude from Canada.

“It is impossible to generate confidence or invest in production today when future production is clearly being blocked by this administration,” Griffith said. Democrats have said oil companies are sitting on thousands of leases to drill on public lands.

DeGette questioned the billions of dollars in profits earned by the companies, and cited $30 billion in taxpayer subsidies they receive as a reason they should help lower gasoline prices.

Wirth restated Chevron’s plans to boost capital expenditure this year by 50%, with about half going to increasing oil and gas output and half to renewable fuels and lower-carbon energy.

Gretchen Watkins, president of Shell USA, said her company neither controls or owns the 13,000 gas stations that carry its brand. “Each of these independent businesses is responsible for setting the local retail price of gasoline.”

Exxon, the top U.S. oil company, on Monday said first-quarter results could top a seven-year quarterly record. Other oil company earnings could also surge after Russia’s invasion pushed up energy prices. read more

“No single company sets the price of oil or gasoline,” said Darren Woods, chairman and CEO of Exxon. “The market establishes the price based on available supply, and the demand for that supply.”

Pioneer CEO Scott Sheffield said it would take time to rev up the company’s production in the Permian Basin, citing worker and supply chain shortages and the decommissioning of many rigs and hydraulic fracturing fleets when prices were low in 2020.

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Reporting by Timothy Gardner, David Shepardson in Washington, Liz Hampton in Denver and Sabrina Valle in Houston; editing by Richard Pullin, Jonathan Oatis, David Gregorio and Marguerita Choy

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World

EXCLUSIVE China’s Sinopec pauses Russia projects, Beijing wary of sanctions -sources

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March 25 (Reuters) – China’s state-run Sinopec Group has suspended talks for a major petrochemical investment and a gas marketing venture in Russia, sources told Reuters, heeding a government call for caution as sanctions mount over the invasion of Ukraine.

The move by Asia’s biggest oil refiner to hit the brakes on a potentially half-billion-dollar investment in a gas chemical plant and a venture to market Russian gas in China highlights the risks, even to Russia’s most important diplomatic partner, of unexpectedly heavy Western-led sanctions.

Beijing has repeatedly voiced opposition to the sanctions, insisting it will maintain normal economic and trade exchanges with Russia, and has refused to condemn Moscow’s actions in Ukraine or call them an invasion. read more

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But behind the scenes, the government is wary of Chinese companies running afoul of sanctions – it is pressing companies to tread carefully with investments in Russia, its second-largest oil supplier and third-largest gas provider.

Since Russia invaded a month ago, China’s three state energy giants – Sinopec , China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOC) (0883.HK) – have been assessing the impact of the sanctions on their multi-billion dollar investments in Russia, sources with direct knowledge of the matter said. read more

“Companies will rigidly follow Beijing’s foreign policy in this crisis,” said an executive at a state oil company. “There’s no room whatsoever for companies to take any initiatives in terms of new investment.”

The Ministry of Foreign Affairs this month summoned officials from the three energy companies to review their business ties with Russian partners and local operations, two sources with knowledge of the meeting said. One said the ministry urged them not to make any rash moves buying Russian assets.

The companies have set up task forces on Russia-related matters and are working on contingency plans for business disruptions and in case of secondary sanctions, sources said.

The sources asked not to be named, given the sensitivity of the matter. Sinopec and the other companies declined to comment.

The ministry said there is no need for China to report to other parties about “whether there are internal meetings or not”.

“China is a big, independent country. We have the right to carry out normal economic and trade cooperation in various fields with other countries across the world,” it said in a faxed statement.

U.S. President Joe Biden said on Thursday that China knows its economic future is tied to the West, after warning Chinese leader Xi Jinping that Beijing could regret siding with Russia’s invasion of Ukraine. read more

Global oil majors Shell (SHEL.L) and BP (BP.L), and Norway’s Equinor pledged to exit their Russian operations shortly after Russia’s Feb. 24 invasion. Moscow says its “special operation” aims not to occupy territory but to destroy Ukraine’s military capabilities and capture what it calls dangerous nationalists. read more

TALKS ON HOLD

Sinopec, formally China Petroleum and Chemical Corp, has suspended the discussions to invest up to $500 million in the new gas chemical plant in Russia, one of the sources said.

The plan has been to team up with Sibur, Russia’s largest petrochemical producer, for a project similar to the $10 billion Amur Gas Chemical Complex in East Siberia, 40% owned by Sinopec and 60% by Sibur, set to come online in 2024.

“The companies wanted to replicate the Amur venture by building another one and were in the middle of site selection,” said the source.

Sinopec hit pause after realising that Sibur minority shareholder and board member Gennady Timchenko had been sanctioned by the West, the source said. The European Union and Britain last month imposed sanctions on Timchenko, a long-time ally of Russian President Vladimir Putin, and other billionaires with ties to Putin. read more

Timchenko’s spokesman declined to comment on sanctions.

The Amur project itself faces funding snags, said two of the sources, as sanctions threaten to choke financing from key lenders, including Russia’s state-controlled Sberbank (SBER.MM) and European credit agencies. read more

“It’s an existing investment. Sinopec is trying to overcome the difficulties in financing,” said a Beijing-based industry executive with direct knowledge of the matter.

Sibur did not comment on the suspension of the talks for the new chemical plant but said it continues to cooperate with Sinopec. It said the two companies continue to work jointly on implementing the Amur plant.

“Sinopec is actively participating in the issues of the project’s construction management, including equipment supplies, work with suppliers and contractors. We are also jointly working on the issues of project financing,” Sibur told Reuters by email.

Sinopec also suspended talks over the gas marketing venture with Russian gas producer Novatek (NVTK.MM) over concerns that Sberbank, one of Novatek’s shareholders, is on the latest U.S. sanctions list, said one source with direct knowledge of the matter. read more

Timchenko resigned from Novatek’s board on Monday in the wake of the sanctions. Novatek declined to comment. read more

Novatek, Russia’s largest independent gas producer, entered a preliminary deal in 2019 with Sinopec and Gazprombank to create a joint venture marketing liquefied natural gas to China as well as distributing natural gas in China.

Beyond Sinopec’s planned Amur plant, CNPC and CNOOC were among the latest investors into Russia’s natural gas sector, taking minority stakes in major export project Arctic LNG 2 in 2019 and Yamal LNG in 2014. read more

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Reporting by Chen Aizhu, Julie Zhu and Muyu Xu; editing by William Mallard and Jason Neely

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Business

Buffett ends drought with $11.6 billion Alleghany insurance purchase

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Berkshire Hathaway Chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, U.S., May 4, 2019. REUTERS/Scott Morgan

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NEW YORK, March 21 (Reuters) – Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) has struck an agreement to buy insurance company Alleghany Corp (Y.N) for $11.6 billion, just weeks after the 91-year-old billionaire bemoaned a lack of good investment opportunities.

Alleghany, whose businesses include reinsurer Transatlantic Holdings, would expand Berkshire’s large portfolio of insurers, which includes auto insurer Geico, reinsurer General Re and a unit that insures against major catastrophes and unusual risks.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Buffett, who has run Berkshire since 1965, said in a statement.

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The acquisition, one of the five largest in Berkshire’s history, would reunite Buffett with Joseph Brandon, who led General Re from 2001 to 2008 and became Alleghany’s chief executive in December.

It would also end Buffett’s six-year drought of large acquisitions, and help him deploy some of the $146.7 billion of cash and equivalents his Omaha, Nebraska-based conglomerate had at year end.

Buffett lamented in his Feb. 26 annual shareholder letter that “internal opportunities deliver far better returns than acquisitions,” and that little “excites us” in equity markets. read more He pledged to keep $30 billion of cash on hand.

Berkshire agreed to pay $848.02 in cash per Alleghany share, a 25% premium over Friday’s closing price.

Alleghany has a 25-day “go-shop” period to find a better offer. Berkshire does not get involved in bidding wars.

The transaction is expected to close in the fourth quarter pending regulatory and Alleghany shareholder approvals. Alleghany would operate as an independent Berkshire unit.

Berkshire “epitomizes our long-term management philosophy,” Brandon said in a statement.

Insurance typically generates more than 20% of operating profit at Berkshire, whose dozens of businesses also include the BNSF railroad, Berkshire Hathaway Energy and Dairy Queen ice cream.

Berkshire also invests hundreds of billions of dollars in stocks such as Apple Inc (AAPL.O), and has this year invested more than $6.4 billion in Occidental Petroleum Corp . read more

New York-based Alleghany was founded in 1929 by railroad entrepreneurs Oris and Mantis Van Sweringen.

It was transformed into an insurance and investment operating company under Fred Morgan Kirby II’s leadership from 1967 to 1992.

Alleghany is sometimes thought of as a mini-Berkshire, and Buffett said the companies had “many similarities.”

Other Alleghany units include RSUI Group, an underwriter of wholesale specialty insurance, and CapSpecialty, a specialty insurer.

Goldman Sachs and law firm Willkie Farr & Gallagher advised Alleghany on the transaction. Law firm Munger, Tolles & Olson advised Berkshire.

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Reporting by Noor Zainab Hussain in Bengaluru and Jonathan Stempel in New York Additional reporting by Mehnaz Yasmin in Bengaluru
Editing by Saumyadeb Chakrabarty and Mark Potter

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US

EXCLUSIVE Washington pins easing of Venezuela sanctions on direct oil supply to U.S. -sources

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An oil pumpjack painted with the colors of the Venezuelan flag is seen in Lagunillas, Venezuela January 29, 2019. REUTERS/Isaac Urrutia

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HOUSTON/WASHINGTON, March 8 (Reuters) – U.S. officials have demanded Venezuela supply at least a portion of oil exports to the United States as part of any agreement to ease oil trading sanctions on the OPEC member nation, two people close to the matter said.

U.S. President Joe Biden on Tuesday banned U.S. imports of Russian oil in retaliation for the invasion of Ukraine, ramping up economic pressure on a key Venezuelan ally.

U.S. diplomats have worked to find energy supplies worldwide that can help compensate for disruption to Russian oil and gas exports caused by sanctions or war. U.S. officials met Venezuelan President Nicolas Maduro in Caracas for the first bilateral talks in years on Saturday.

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Venezuela has been under U.S. oil sanctions since 2019 and could reroute crude if those restrictions were lifted.

U.S. officials made clear their priority was to secure supplies for the United States, the people told Reuters. The officials told their Venezuelan counterparts that any relaxation in U.S. sanctions would be conditional on Venezuela shipping oil directly to the United States, the sources said.

The United States had not previously made stipulations about the specific destination of cargoes permitted under waivers to sanctions.

The U.S. Department of State and Venezuelan state run energy company PDVSA did not immediately reply to requests for comment.

Chevron Corp (CVX.N), the last U.S. oil producer still operating in Venezuela, could be the first beneficiary if a deal is reached with Maduro’s administration. Chevron has been barred from shipping Venezuelan oil from its joint ventures since 2020 and has pushed to overturn the ban.

A Chevron spokesperson declined to comment on the U.S. discussions. The company operates “in compliance with the current sanctions framework provided by the U.S. Office of Foreign Assets Control,” he said.

The California-based company has a special license that allows it to maintain a low-level presence in the country, only to ensure the maintenance and safety of its facilities.

With that license due to expire in June, Chevron has sought authorization from the U.S. Treasury Department to trade Venezuelan oil cargoes for debt repayment through a revamped exemption, Reuters has reported. Chevron wants the revised permit so it can recoup hundreds of million dollars in unpaid debt and late dividends from its joint ventures with PDVSA.

If Washington decides to ease sanctions, Chevron could be in position to partially recover production in Venezuela and resume exports to its own and other refineries on the U.S. Gulf Coast, one of the sources said, replacing Russian barrels.

Chevron had no immediate comment.

Little progress was made in the weekend talks as Washington sought to gauge prospects for peeling Maduro away from his alliance with Russian President Vladimir Putin. But the parties agreed to further talks.

The sides established what one person familiar with the matter called “maximalist” negotiating positions. Washington pressed for free presidential elections and for the release of Americans jailed in Venezuela, while Maduro asked for a wide lifting of sanctions.

But the most pressing topic was energy. The parties discussed returning Venezuelan oil to markets hit by disruptions of Russian supplies and a workaround for PDVSA to temporarily access international bank transfers, according to the sources.

The meeting sparked strong reactions on Capitol Hill, where New Jersey Senator Robert Menendez and other U.S. lawmakers criticized the outreach to Maduro, who is under U.S. sanctions for human rights abuses.

The U.S. engagement comes as Venezuela’s financial lifeline to Russia is fraying under sanctions on Moscow following its bombardment of Ukraine. Venezuela’s funds held in Russian banks blacklisted by Washington have been frozen.

Oil prices rose another 5% on Tuesday to $128 per barrel on the U.S. import ban on Russia – which accounted for 670,000 barrels per day in 2021. Britain said it will phase out Russian imports by year end.

Venezuela’s oil production last year recovered from free fall and averaged 636,000 bpd. Officials have said it can boost output and exports, but analysts believe there is little room for further increases without massive new spending.

However, many refiners in the U.S. Gulf Coast that were importing Russian barrels could potentially resume processing Venezuelan heavy oil and fuel, among their preferred feedstock for specialized units.

Before sanctions, U.S. Valero Energy (VLO.N), Citgo Petroleum, Chevron and PBF Energy (PBF.N) were among top U.S. buyers of Venezuelan oil.

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Reporting by Marianna Parraga in Houston and Matt Spetalnick in Washington; additional reporting by Vivian Sequera in Caracas and Gary McWilliams in Houston; Editing by Stephen Coates

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Business

Exclusive: Exxon launches U.S. shale gas sale to kick-start stalled divestitures

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HOUSTON, Aug 10 (Reuters) – Exxon Mobil Corp (XOM.N) has begun marketing U.S. shale gas properties as it ramps up a long-stalled program that aims to raise billions of dollars to shed unwanted assets and reduce debt taken on last year.

Three years ago, the top U.S. oil producer set a goal of raising $15 billion from sales by December 2021. More recently, it promised to accelerate lagging sales to whittle a record $70 billion debt pile.

The company’s XTO Energy shale unit is seeking buyers for almost 5,000 natural gas wells in the Fayetteville Shale in Arkansas, spokeswoman Julie King confirmed.

The assets are among gas projects with declining production and market value Exxon is selling as it focus on newer ventures in Guyana, offshore Brazil and Texas’s Permian Basin.

Exxon is marketing the properties itself and aims to receive bids by Sept. 16 and close any sale by year-end.

“We are providing information to third parties that may have an interest in the assets,” King said. No buyers have been identified, she said, declining to confirm the due date for bids or the company’s anticipated value on the wells.

DECLINING PRODUCTION

The company has achieved about a third of its three-year, $15 billion sales target.This year, it has received sales proceeds of $557 million through June, and has deals pending valued at more than $2.15 billion. read more

Exxon acquired the Fayetteville assets in 2010 for $650 million during a shale boom that would change the U.S. energy landscape, leading to an oversupply of gas that pushed prices to record lows and last year. This led Exxon to reduce the value of its U.S. oil and gas holdings by $17.1 billion. read more

Output in the assets on offer fell by more than half since 2016 to about 160 million cubic feet per day last year, according to Exxon marketing materials seen by Reuters.

The Arkansas properties cover some 416,000 net acres (1,680 square kilometers) and are some of the North American natural gas resources cut last year from Exxon’s development plan. The sale includes 844 operated and 4,104 non-operated wells, King said.

Dallas-based Merit Energy is evaluating the properties, one person familiar with the matter said. Merit in 2018 purchased about 258,000 acres in the same area from BHP for $300 million.

Merit did not reply to requests for comment by phone, e-mail and LinkedIn. Exxon declined to comment on potential bidders.

WORLDWIDE DIVESTMENTS

Exxon, which suffered a historic $22.4 billion loss in 2020, is selling dozens of properties in Asia, Africa, the United States and Europe.

The company is prioritizing debt reduction and its shareholder dividend, officials said last month. After total debt last year doubled to almost $70 billion since 2018, Exxon paid off more than $7 billion this year, to reduce its burden to $60.6 billion.

This year, it has held talks with Britain’s Savannah Energy (SAVES.L) over properties in Chad and Cameroon and sold stakes in two deep water oilfields to Occidental Petroleum (OXY.N) and others. read more

Exxon is seeing new interest in its properties with this year’s rebound in oil and gas prices, said Exxon Senior Vice President Jack Williams on July 30.

“That whole divestment discussion that we’ve had in the past continues,” Williams said.

By Sabrina Valle in Houston, Liz Hampton in Denver and Shariq Khan in Bengaluru; editing by Gary McWilliams, Marguerita Choy and David Gregorio

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