Sources say that Sinochem, a Chinese company, plans to withdraw from its US shale joint venture with Exxon.
Sinochem, a Chinese state-backed oil company, plans to sell its 40% stake, worth upwards of $ 2 billion, in a U.S. joint venture with Exxon Mobil, according to people familiar with the situation.
Sources claim that Sinochem hired Barclays investment bankers to help it with the sale of its Wolfcamp joint-venture stake. Source: Exxon has the first right of refusal to sell the joint venture, which is majority owned and operated by the company.
Sources cautioned, however, that the sale discussions are still in their early stages and a deal is not guaranteed with Exxon, or any other interested parties. This could include rival Asian oil companies. Sinochem may still choose to keep its stake, they said. Sources requested anonymity in order to discuss confidential discussions.
Sinochem, Exxon Barclays and Barclays have not responded to comments immediately.
Sinochem has been involved in the Permian Basin, Texas for over 11 years. This is the heartland of America's shale oil revolution. The region's meteoric growth over the past 11 years has propelled the U.S. up to the top of the global oil production charts and export charts.
Sinochem purchased the stake in Pioneer Resources for $1.7 billion back in 2013, when the production of the approximately 83,000 net acres of land (33,590 hectares net) under the JV were just around 10,000 barrels equivalent per day.
One source said that the recent average production from the land was over 44,000 boepd. Of this, approximately 75% is oil.
Exxon bought Pioneer for $60 billion in May. This was the largest deal of a wave of record-breaking consolidations in the U.S. Oil Industry. Exxon became the largest producer in the Permian basin after the deal.
Frank Ning said that Sinochem had reevaluated its oil exploration and production business, which has struggled in recent years, to focus on new materials and the life sciences.
According to a Sinochem source, the Wolfcamp JV produces more oil and gas than any other Sinochem asset outside of China.
Since 2017, the company has been trying to sell off its 40% stake in Brazil’s Peregrino Oilfield.
Reports say that a state-mandated merger between Sinochem and ChemChina by 2021 has caused Sinochem to face new challenges. The company had to shut down several oil refineries earlier this year in order to reduce losses due to sluggish Chinese demand for fuel. (Reporting from Shariq Khan, New York; additional reporting by Chen Aizhu, Singapore; editing by Jonathan Oatis).
(source: Reuters)
