ExxonMobil is considering a sale of its Malaysian upstream offshore assets. Bloomberg reported that the major is said to be working with advisers on a potential sale, which could raise between $2 billion and $3 billion.
The report comes a month after Exxon sold its remaining Norwegian portfolio to Var Energi for $4.5 billion, and three weeks after news broke of the company’s intention to sell its 50% stake in the Gippsland Basin development in Australia’s Bass Strait, which could net $3 billion. ExxonMobil is looking to divest about $15 billion in non-strategic assets by 2021.
ExxonMobil operates under four production sharing contracts (PSCs) with Petronas, producing approximately one-fifth of the nation’s oil production and around half of natural gas supplies to Peninsular Malaysia.
Earlier this week, Wood Mackenzie identified Malaysia as one of ExxonMobil’s top five divestment targets, along with Australia, Thailand, Vietnam, and Indonesia. Research director Andrew Harwood said that Exxon Mobil holds several mature assets in these areas, with large abandonment liabilities looming. Divesting these assets, he said, would allow the company to manage a more focused, higher-margin portfolio centered on two massive LNG projects: Papua New Guinea and the non-operated Gorgon LNG project in Western Australia.
“The growth potential of PNG and long-term, high-margin cash flow from Gorgon LNG will form the backbone of ExxonMobil’s Asia Pacific portfolio for the next decade,” Harwood said. “Disposing some or all the assets we have highlighted would allow the major to refocus on more material growth opportunities in the region and elsewhere in the global portfolio.”
Wood Mac said the biggest challenge ExxonMobil will face in divesting is finding buyers. Harwood said there is no shortage of supply for potential buyers as the majors have more than $70 billion of assets up for sale. In addition, recent M&A activity in Asia Pacific has been dominated by a handful of regional national oil companies like PTTEP, and local players like Medco Energi and Santos. Whether those companies have enough money to support further acquisition ambitions remains to be seen.
“After several aborted efforts in recent years, perhaps private equity will now sense a value opportunity and make a meaningful dive into the upstream market in Asia,” Harwood said.