U.S. supermajor Exxon Mobil Corp.'s potential $4 billion sale of nonoperating Norwegian oil and gas assets would not only advance the major's plan to divest $15 billion in holdings by 2021 but would also mark the largest upstream deal in the last five years in the North Sea, analysts said.
"$4 billion is higher than our [previous] estimate, but that can be explained by infrastructure we didn't put a value on and possibly a higher implied oil price more in line with other transactions on the [Norwegian Continental Shelf]. In any case, it will be a landmark transaction," Rystad Energy's Simon Sjøthun told S&P Global Market Intelligence in a Sept. 5 email.
Norway remains one of the premium M&A markets in the world, according to analysts. A sale of Exxon's noncore assets on the Continental Shelf for $4 billion would be the largest "pure" private Norwegian transaction since the divestment of 15% of the State's Direct Financial Interest in offshore licenses in 2011 to state-controlled Equinor ASA, then known as Statoil, when the company was partially privatized, Sjøthun said.

Exxon is reportedly engaged in exclusivity talks to sell its nonoperated stakes in about 20 Norwegian fields to Eni SpA subsidiary Vår Energi AS. The acquisition would make Vår Energi, which produced 169,000 barrels of oil equivalent per day in 2018, the second-largest producer in Norway. Vår Energi said earlier this year that it intends to ramp output to 250,000 boe/d by the beginning of the 2020s.
Exxon's Norwegian upstream assets, which include the Ormen Lange field, operated by Royal Dutch Shell PLC, and the Snorre field, operated by Equinor ASA, are highly cash generative with low operating costs. Sjøthun said Exxon's stake in Snorre alone is worth almost $700 million.
"With limited growth opportunities beyond the Snorre expansion project, shifting away from the assets is in keeping with messaging of focusing the portfolio on core areas featuring growth potential, with dry powder potentially bolstering the war chest for M&A ... or a buyback program," analysts from Tudor Pickering Holt & Co. wrote in a Sept. 6 note to clients.
Speaking Sept. 4 at the Barclays CEO-Energy Power Conference in New York City, Exxon CEO Darren Woods said the company is in no rush to acquire new assets or companies in the Permian Basin, but it will certainly keep an eye out for good deals in the region.
The sale makes Exxon one of several U.S. companies that have scaled back or ended activity in Norway. "Investors today want U.S. companies to focus on shale, where production growth can be achieved in much shorter time frames," Raymond James analyst Muhammed Ghulam said in a Sept. 5 email.
Exxon plans to do just that. Leveraging its size and scale, Exxon will spend $30 billion this year and $33 billion to $35 billion in 2020, with a large chunk of that total spend earmarked to increase production in the Permian to 1 million boe/d in the next five years. In the second quarter, Exxon's Permian output was 274,000 boe/d, soaring nearly 90% on the year.
Exxon is remaining mum on the details of a pending deal for the Norwegian assets. "As a matter of practice, Exxon does not comment on commercial discussions," company spokeswoman Julie King said in a Sept. 5 email.
The Texas-based Exxon has been making a slow exit from Norway, selling off its stake in the Gassled offshore natural gas pipeline infrastructure in 2010 and then divesting operating interests in the Balder, Jotun Ringhorne and Ringhorne East fields in 2017 to Point Resources AS.
In the last year, smaller producers have scooped up infrastructure and what the larger companies have deemed noncore assets between the U.K. and Scandinavia in the hopes of extracting remaining reserves from these older assets.
Premier Oil PLC, Aker BP ASA, OKEA AS and chemicals company INEOS Group Ltd. are some of the companies that have been interested in acquiring assets in the North Sea.
Exxon, which had been floating the potential sale of its Norwegian assets since June, was said to be in talks previously with several potential buyers including producer DNO ASA and North Sea-focused exploration and production company Ithaca Energy Ltd., owned by Israel-based Delek Group Ltd. In May, Ithaca inked a deal to buy assets in Norway for $2 billion from Chevron North Sea Ltd., a unit of Chevron Corp.

