Exclusive-China’s Sinochem plans to exit US shale JV with Exxon, sources say

By Shariq Khan

NEW YORK (Reuters) – Chinese state-backed oil and chemicals company Sinochem plans to sell its 40 percent stake in a U.S. shale joint venture with oil major Exxon Mobil valued at more than $2 billion , people familiar with the matter told Reuters.

In recent weeks, Sinochem has hired investment bankers at Barclays to advise it on a potential sale of its stake in the Wolfcamp joint venture, one of the sources said. Exxon, the majority owner and operator of the JV, has the right of first refusal on the sale, the source added.

The sources cautioned that sale considerations are at an early stage and that a deal with Exxon or other interested parties, which could include rival national oil corporations in Asia, is not guaranteed. They said Sinochem could still decide to keep its stake. The sources requested anonymity to discuss confidential discussions.

Sinochem, Exxon and Barclays did not immediately respond to requests for comment.

A sale would end Sinochem’s more than 11-year involvement in Texas’ Permian Basin, the heart of the US shale revolution. The region’s meteoric rise in production over these 11 years has catapulted the US to the top of global oil production and exports.

Sinochem acquired the stake from Pioneer Resources in 2013 for $1.7 billion, when production from the roughly 83,000 net acres (33,590 net hectares) of land in the JV was about 10,000 barrels of oil equivalent per day (boepd).

The most recent production from the field averaged more than 44,000 boepd, about 75 percent of which is oil, one of the sources said.

Exxon completed a $60 billion acquisition of Pioneer in May, the biggest deal in a record wave of consolidation in the U.S. oil industry. The deal made Exxon the largest producer in the Permian Basin.

Sinochem has reassessed its struggling oil exploration and production business in recent years to shift its focus to new materials and life sciences, its former chairman Frank Ning said in 2017.

Wolfcamp JV is Sinochem’s largest active oil and gas producer outside of China, according to a company source.

The company has also been trying to sell its 40 percent stake in Brazil’s Peregrino oil field since 2017.

The state-mandated merger with ChemChina in 2021 has brought fresh headaches for Sinochem as the company was forced to shut down several oil refineries in eastern China earlier this year to stem losses amid sluggish Chinese fuel demand, it reported Reuters.

(Reporting by Shariq Khan in New York, additional reporting by Chen Aizhu in Singapore; Editing by Jonathan Oatis)