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Exxon could look to sell Asia Pacific assets to meet $15B divestment target

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Exxon could look to sell Asia Pacific assets to meet $15B divestment target

As Exxon Mobil Corp. ramps up efforts to sell $15 billion in assets by 2021, the U.S. supermajor could look to dispose of various noncore holdings across Asia Pacific in 2020 to meet that target, according to Wood Mackenzie analysts.

Assets in Australia, Malaysia, Vietnam, Thailand and Indonesia could fetch Exxon a total of $5 billion, or one-third of the company's overall divestment target, Wood Mackenzie said in an Oct. 7 note to clients.

"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, centered on Papua New Guinea and the non-operated Gorgon LNG project," Wood Mackenzie research director Andrew Harwood said.

Like many of its peers, Exxon is looking to high grade its portfolio and shed aging, noncore assets to focus on investments in more prolific production areas around the world.

Kicking off its divestiture program in earnest, Exxon in September inked a deal to sell nonoperated interests in Norway to Eni SpA subsidiary Vår Energi AS for $4.5 billion. Exxon also confirmed it intends to divest holdings in Malaysia and Australia, including a 50% stake in the Bass Strait JV and a 32.5% operating interest in the Kipper Tuna Turrum offshore project.

Other top disposal assets for Exxon could include its 50% operating interest in Gas PSC and 78% operating stake in EPMI 2008 PSC in Malaysia, a 10% stake in Sinphuhorm and 80% operating interest in Nam Phong in Thailand, a 63.7% operating stake in Cai Voi Xanh in Vietnam and a 50% interest in Cepu in Indonesia, Wood Mackenzie 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," said Harwood, who pointed to growth potential from Papua New Guinea and long-term, high-margin cash flow from Gorgon LNG. These regions could form the "backbone" of Exxon's Asia Pacific portfolio over the next ten years, he said.

Finding available buyers could be one of the biggest challenges Exxon faces in its sale efforts, Harwood said. Exxon tried to sell its 50% stake in the Gippsland oil assets in Australia in 2016.

"The majors have more than US$70 billion of assets up for sale, so there is clearly no shortage of supply for potential buyers," he said.