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ExxonMobil (XOM) to Divest 6.8% Stake in ACG Field


Per Reuters, Exxon Mobil Corporation XOM intends to divest stake of 6.8% in Azerbaijan’s largest oil field —Azeri-Chirag-Gunashli (“ACG”) field — in the Caspian Sea. The company refused to disclose any details.

The divestiture, which will signify the withdrawal of the U.S. major from the former Soviet state after 25 years, is expected to fetch about $2 billion. Even Chevron Corporation CVX is believed to be seeking buyers for its stake. U.S. companies are redirecting their focus on development of domestic shale fields. ExxonMobil is likely to invest billions in developing a series of large oil discoveries in Guyana. Also, Chevron is developing the extension of the giant Tengiz field in Kazakhstan is projected to cost $37 billion.

The original deal struck in 1994 was aimed to develop Azerbaijan’s oil industry soon after the collapse of the Soviet Union. The field’s large reserves and hopes of future major discoveries were expected to aid Europe diversify away from Russian oil and gas. However, such beliefs faded away as no large discoveries were made.

If ExxonMobil exits from ACG, it will leave Chevron as the only U.S. company in the project, with a holding of 9.57%. The company will be the third largest stakeholder after BP plc BP and Azeri state oil firm Socar, with holdings of 30.4% and 25%, respectively. Other partners in the field include Japan’s Inpex and Equinor ASA EQNR holding 9.3% and 7.3%, respectively. Turkey’s TPAO, Japan’s Itochu and India’s ONGC Videsh have smaller stakes.

The ACG fields still produce the majority of Azeri oil output. The fields produced about 75% of overall Azeri crude output or nearly 600,000 barrels per day in the first half of 2018.

BP, the operator of the project, had no information about ExxonMobil’s or Chevron’s plans. The ACG project received immense support from the United States. Initially, five American companies including Exxon, Amoco, Unocal, Pennzoil and McDermott had participated in the deal. Eventually, most U.S. companies left the project or were taken over by rivals, while support from the United States also declined.

Even Azerbaijan has become confident in controlling energy wealth by raising large stakes in its energy projects through the state company Socar.

Zacks Rank

Currently, ExxonMobil carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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