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ExxonMobil’s predicted top five divestment targets in the Asia-Pacific
Wood Mackenzie has identified what it sees as the five most likely disposal candidates after ExxonMobil signalled the start of its Asia-Pacific divestment programme. Together, these opportunities are worth $5bn and could contribute a third of the supermajor's global divestment target.
Having set its ambition to divest $15bn worth of assets by 2021, ExxonMobil recently confirmed it will sell stakes in Peninsular Malaysia and the Bass Strait joint venture in Australia. The company joins a growing list of major producers rationalising non-core positions to focus on a tighter selection of material growth opportunities and legacy assets.
‘ExxonMobil holds several mature assets in Australia, Thailand and Malaysia, with large abandonment liabilities looming. The Asia-Pacific portfolio also includes large-scale, but low return, and early-life, but low margin, resources in Vietnam and Indonesia. Divesting these assets would result in a more focused, higher-margin portfolio, centred on Papua New Guinea (PNG) and the non-operated Gorgon LNG project,’ comments Wood Mackenzie Research Director Andrew Harwood.
Wood Mackenzie believes ExxonMobil’s top five divestment targets include:
- Australia – Bass Strait joint venture (where is holds a 50% stake, acting as operator) and Kipper (32.5%, operator)
- Malaysia – Gas production sharing contract (PSC) (50%, operator) and EPMI 2008 PSC (78% operator)
- Thailand exit – Sinphuhorm (10%) and Nam Phong (80%, operator)
- Vietnam exit – Cai Voi Xanh (63.75%, operator)
- Indonesia exit – Cepu (50%, operator)
Harwood adds: ‘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. 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. ExxonMobil's 2020–2030 production CAGR [compound annual growth rate] in Asia-Pacific would improve from –3% to +3% if the portfolio is concentrated on Gorgon and PNG.’
However, the bigger challenge facing ExxonMobil is availability of buyers, notes Wood Mackenzie. The majors have more than $70bn of assets up for sale, so there is clearly no shortage of supply for potential buyers. In addition, recent mergers and acquisitions (M&A) activity in Asia-Pacific has been dominated by a handful of regional national oil companies such as PTTEP, and local players, the likes of Medco Energi and Santos. It remains to be seen if these players still have the financial capability to support further acquisition ambitions.
‘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 says.