ExxonMobil’s Norway exit could break records

Source: press release, 27 June 2019

Pure NCS deals over USD 1 billion (source: Rystad Energy UCube)
Pure NCS deals over USD 1 billion (source: Rystad Energy UCube)

US supermajor ExxonMobil is looking to sell its Norwegian upstream assets. The portfolio has an estimated value of USD 3.1 billion, according to Rystad Energy*.

Rystad Energy partner Simon Sjøthun notes that a sale of this magnitude could be the largest private transaction ever recorded on the Norwegian Continental Shelf.

“The valuation implies that a combined divestment of the entire portfolio would put the transaction at the very top of pure Norwegian transactions since the SDFI spin off in 2001,” Sjøthun says, with reference to the divestment of 15% of the State’s Direct Financial Interest (SDFI) in Norwegian offshore licenses when then Statoil was partially privatised 18 years ago.

Per 1 January 2019, ExxonMobil controlled 530 million barrels of oil equivalent on the Norwegian Continental Shelf. The company’s most valuable asset is its stake in the Snorre field, worth almost USD 700 million.

“The profile is mature and declining, but nevertheless sizeable in terms of current production. A portfolio generating high cash flow and with limited tax balances, given the Norwegian fiscal regime with 90% nominal tax relief on investment, will be highly attractive for any E&P company without sufficient revenue,” Sjøthun remarks.

ExxonMobil’s decision to put its assets up for sale follows a gradual decline in Norwegian activity, highlighted by the divestment of its stake in the Gassled pipeline infrastructure in 2010, the completion of its last operated exploration well in 2010, and the divestment of its operated portfolio to Point Resources in 2017.

“The portfolio now up for review consists strictly of non-operated assets. The potential exit will follow the trend of American companies refocusing their efforts away from North West Europe,” Sjøthun adds.

*Valuation based on UCube base case prices June 2019, 7.5% real discount rate and mid-year taxation. Also excludes any value from infrastructure.