By Shariq Khan
NEW YORK (Reuters) – Sinochem, a Chinese state-backed oil and chemicals company, is reportedly considering selling its 40% stake in a U.S. shale joint venture with Exxon Mobil, valued at over $2 billion, according to sources familiar with the matter.
Barclays has been hired by Sinochem in recent weeks to advise on the potential sale of its stake in the Wolfcamp joint venture, one source mentioned. The source added that Exxon, the majority owner and operator of the joint venture, has the first right of refusal in the sale.
It is important to note that the sale discussions are in the early stages, and there is no guarantee of a deal with Exxon or other interested parties, which may include rival Asian national oil corporations. The sources, who requested anonymity, emphasized that Sinochem could still opt to retain its stake.
As of now, there has been no response from Sinochem, Exxon, or Barclays regarding this matter.
If the sale proceeds, it would mark the end of Sinochem’s involvement in the Permian Basin of Texas after more than a decade. The region has played a crucial role in the U.S. shale revolution, propelling the country to the forefront of global oil production and exports.
Sinochem acquired the stake from Pioneer Resources in 2013 for $1.7 billion when production was at around 10,000 barrels of oil equivalent per day (boepd) on the approximately 83,000 net acres of land under the joint venture.
Recent production from the site has averaged over 44,000 boepd, with approximately 75% being oil, according to one of the sources.
Exxon’s acquisition of Pioneer for $60 billion in May made it the leading producer in the Permian Basin, further solidifying its position in the region.
In recent years, Sinochem has been reassessing its struggling oil exploration and production business to shift its focus to new materials and life sciences, as stated by its former chairman, Frank Ning, in 2017.
The Wolfcamp joint venture represents Sinochem’s largest oil and gas producing asset outside of China, as per a company source.
The company has also been attempting to sell its 40% stake in Brazil’s Peregrino oilfield since 2017.
Following a state-mandated merger with ChemChina in 2021, Sinochem faced challenges and had to close several oil refineries in eastern China earlier this year to mitigate losses amid weak Chinese fuel demand, as reported by Reuters.