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EurOil COMMENTARY EurOil

Exxon, Shell prepare for more North

Sea divestments

Another round of deals that see majors scale back in the North Sea is on the horizon

NORTH SEA EXXONMOBIL and Royal Dutch Shell are pre- Shell
paring to make more divestments in the North Meanwhile, Shell wants to dispose of shares in
WHAT: Sea, in order to raise cash to weather the oil mar- two oil and gas fields and two pipelines in Nor-
Both ExxonMobil and ket turmoil. way, according to a sales document seen by Reu-
Shell are searching for Exxon has revived plans to sell its UK North ters on June 11.
buyers for North Sea Sea operations, Reuters reported on June 11 cit- On offer is the Anglo-Dutch firm’s 6.45%
assets. ing sources, after delaying the move for several stake in the Kvitebjorn field and pipeline and a
months because of the coronavirus (COVID- 3.225% share in the Valemon Unit and Valemon
WHY: 19) pandemic. The US major has discussed a rich gas pipeline. Both the Equinor-operated
Both majors are looking sale with a number of possible buyers in recent fields have already peaked and now their output
to raise cash to settle weeks, but it is unlikely to launch a formal sales is in decline.
debts, pay dividends and process if there is insufficient market interest. Kvitebjorn came on stream in 2004 and pro-
reinvest. Exxon’s UK business comprises shares in duction reached a height of 45,300 bpd of oil and
nearly 40 oil and gas fields, controlled through its almost 7 bcm of gas in 2012, according to Nor-
WHAT NEXT: subsidiary Esso Exploration & Production UK. wegian petroleum ministry data. But it has fallen
Potential buyers could Together the fields net around 80,000 barrels per steadily since then and amounted to 13,600 bpd
include private equity- day (bpd) for Exxon, along with 4.56bn cubic and 4.5 bcm in 2019. Valemon peaked in 2016
backed players and metres of gas per year. and flowed 3,100 bpd of oil and 1.54 bcm of gas
other investors with less The company began testing for interest in last year.
current exposure to oil its UK and Norwegian assets last year, as part Shell is seeking $50-100mn for the assets,
and gas. of plans to exit the European upstream sector according to Reuters sources. It will maintain a
to focus on high-margin plays elsewhere. It cut considerable presence off Norway, with shares in
a deal to sell shares in more than 20 producing 34 production licences, 14 of which it operates.
fields off Norway in October to Eni-controlled In November 2018 it divested its positions at the
Var Energi for $4.5bn and the sale was finalised Draugen oil and Gjoa gas fields to private equi-
before year-end. ty-backed firm OKEA, raising $526mn.
Exxon has not had this success with its UK The COVID-19 crisis has led to an increase
operations. The company had been hoping to in the number of oil and gas assets being put up
fetch over $2bn from the assets, but given cur- for sale, with Norwegian consultancy Rystad
rent market conditions, it is more likely to secure estimating on June 2 that 5bn barrels of oil and
only $1.0-1.5bn, sources told Reuters. Many of 7.5bn barrels of oil equivalent (boe) of gas are
the fields are mature, and so their value will currently on offer. The majors account for the
depend greatly on how Exxon and the buyer bulk of these planned divestments, as they look
agree to handle decommissioning costs. They to shore up their financial position while main-
are mostly operated by Shell. taining dividends.
Bloomberg reported in January that Exxon Potential buyers in the North Sea could
was working with investment bank Jefferies include private equity-backed firms, such as
Financial Group on the divestment. Chrysaor, Neptune and OKEA, as well as other
The US major is looking to shed $25bn of investors with less current exposure to oil and
assets in the years ahead to release cash that gas. ™
can be reinvested in a handful of megaprojects,
including $15bn of targeted sales by the end
of 2021. It recently resumed its search for a
buyer for its 6.8% stake in Azeri-Chirag-Gu-
nashli (ACG), Azerbaijan’s largest oilfield.
But besides the uncertain price outlook, this
sale will be complicated by OPEC+ produc-
tion cuts imposed on the project by the Azeri
government.
ExxonMobil also wants to offload its 50%
stake in the Neptun Deep gas block in the Roma-
nian Black Sea, where it is partnered with Aus-
tria’s OMV.

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