Exxon offloads North Sea assets

ExxonMobil is selling a suite of North Sea assets to Norwegian private equity group HitecVision in a deal worth at least $1bn, marking the latest retreat by a big oil group from the UK’s once-prolific offshore oil sector.

The deal with HitecVision’s UK vehicle Neo Energy announced on Wednesday comes as the US supermajor seeks to repair a balance sheet stressed by last year’s oil-price collapse and refocus on more lucrative parts of its business.

“We continue to high-grade our portfolio by divesting assets that are less strategic and focusing our investments on our advantaged projects that are among the best in the industry,” said Neil Chapman, senior vice-president.

Several US and European oil groups have either been exiting or reducing their exposure to the ageing North Sea basin to focus on lower cost regions such as the North American shale. ConocoPhillips sold its North Sea assets in 2019 in a $2.7bn deal, and Chevron offloaded the bulk of its UK business to Israel’s Delek Group.

Buyers backed by private equity began hoovering up North Sea assets after the 2014 oil price crash, seeing an opportunity to squeeze more production from older fields or those that had suffered from under-investment as they were not seen as core to the majors.

However, analysts and bankers have in recent years pondered how private equity investors would be able to exit given waning appetite on public markets for fossil-fuel companies. One such private equity-backed company, Chrysaor, last year agreed a reverse takeover with publicly listed Premier Oil.

Exxon’s sale includes interests in 14 producing fields in the central and northern parts of the North Sea, as well as related infrastructure. Exxon said its share of production from the assets was just under 40,000 barrels a day of oil and gas in 2019.

The company said it would retain its share of non-operated assets in the southern North Sea and its stake in a pipeline supplying ethane to its ethylene plant in Scotland. The transaction should close in mid-2021, Exxon said. A rise in commodity prices may increase the deal value by $300m.

The company said last year it would continue with a plan to divest $15bn worth of assets to streamline its portfolio. It sold its interests in the Norwegian North Sea for $4.5bn in 2019.

Exxon endured a brutal 2020 as the pandemic-induced oil crash ripped into its business, forcing it to slash capital spending plans and sack thousands of workers.

The company is also facing a proxy shareholder battle, after activist investors emerged late last year with a campaign to force the company into a strategic shift.

Exxon this month reported its fourth straight quarterly loss and its first ever annual loss last year, as it booked colossal writedowns on assets in North America and Argentina.

Neo Energy said the deal would propel it among the top five so-called independent producers in the North Sea, with production this year expected to average 70,000 barrels of oil equivalent a day following completion, although it has ambitions to raise this to 120,000 b/d in the “near-term”.

It already owns assets in UK waters, including a portfolio acquired last year from France’s Total.