Exxon Accelerates Deleveraging, Targets Sale Of Shale Gas Properties By End Of 2021

Exxon Accelerates Deleveraging, Targets Sale Of Shale Gas Properties By End Of 2021

Traditional oil and gas company-turned ESG darling Exxon (we’re only half joking) is heading into the second half of 2021 with momentum. Not only has the oil giant benefitted from the tailwind of increased oil demand and rising prices, but now it is looking to accelerate its deleveraging by selling its shale assets. 

The company has restarted marking its shale gas properties in an attempt to “reduce debt taken on last year,” according to Reuters

Exxon is following through on plans it set three years ago to raise $15 billion from asset sales by December 2021. The pandemic threw a wrench in the gears for most of 2020, as the company had to deal with the dual threat of a demand zap coupled with lower oil prices. On top of that, the company was struggling to address its image as a oil and gas company in the midst of a historic adoption of stock market virtue signaling ESG investing. 

Exxon lost a record $22.4 billion in 2020, but has committed to making its dividend and deleveraging its priority.

So far this year, the company has achieved sales and has pending sales totaling about $2.7 billion. Overall, it has reached about $5 billion of its $15 billion sales goal. The company has paid off more than $7 billion in debt this year. 

Exxon has about $60 billion in debt it now must deal with as a result. Its XTO Energy shale unit is looking to sell almost 5,000 natural gas wells in the Fayetteville Shale in Arkansas, the report says. Exxon has turned focus from these underperforming assets to newer wells in Guyana, offshore Brazil and – believe it or not – Texas’s Permian Basin.

The Arkansas wells cover about 416,000 net acres. Their output has fallen by more than half since 2016, the report says. The assets were acquired in 2010 for $650 million during the midst of the shale boom. 

The company is expecting bids for the properties by September 16 and is looking to close sales by the end of 2021.

Spokeswoman Julie King said: “We are providing information to third parties that may have an interest in the assets.” 

Dallas-based Merit Energy, which has purchased wells in the area from BHP, is reportedly considering the assets. 

In addition to a deleveraging, Exxon is also in the midst of a change to its image. Recall, back in May, activist investor Engine No. 1 won two seats on Exxon’s board. Their goal was reportedly to change the company’s path towards one centered around achieving net-zero carbon emissions by 2050 or sooner.

The fund was founded by veteran hedge fund investor Chris James. Charlie Penner, one of Engine No. 1’s leaders, told investors earlier this year that Exxon management was “determined to fight off the future for as long as possible,” but added: “change is coming.”

According to Reuters, BlackRock, the world’s largest asset manager, who owned a 6.7% stake in Exxon at the time, gave full support to Engine No. 1 mission to force new change on the company’s board. The activist fund won support from Legal & General, one of Exxon’s top 20 investors. They also gained support from large pension funds, including CalPERS, calSTRS, and New York State Common Retirement Fund.

Tyler Durden
Wed, 08/11/2021 – 12:25

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