AlwaysFree: Oil Major’s Asset Sale Target Seems Too Much

Asset sale targets from major oil companies are seen to be too much in the current global economy.

Eight of the global top oil firms, ExxonMobil, Chevron, Royal Dutch Shell, Total, Equinor, Eni, and ConocoPhillips are likely to divest its assets worth around USD111 billion or 68 billion barrels of oil and natural gas equivalent to slashing both their ballooning debt and their carbon footprints.

The wave of asset divestment could mean an opportunity for smaller companies to snag more affordable assets,

However, some economists and market players said that the sales would not come easy. Total CEO Patrick Pouyanne even opined that at the moment, the decision to sell assets is unwise. 

Disposal could be difficult in relation to the narrowing pool of buyers and a growing reluctance to lend to the oil and gas sector. Oil prices have not yet recovered from the record low caused by the coronavirus pandemic, therefore, buying assets is less interesting and beneficial at the moment.

Garrett Soden, CEO of Africa Energy, commented that the oil and gas asset sales will instead put pressure on market pricing if there are few buyers for these assets. On the other hand, he also thinks that some investment decreases by major firms could lead to tighter supply and higher oil prices, which would increase the value of their resources.

Therefore, economist Spiro Youakim of investment bank Lazard offered a piece of advice for oil majors to consider spinning off unwanted oil and gas production and refining businesses to attract new investors, as buyers, including private equity, lose appetite.

“The majors’ portfolios are exceedingly large and they include more peripheral assets which could be run more effectively by different types of investors,” Youakim said.

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