Exxon Mobil is selling its non-operating upstream assets in the UK’s central and northern North Sea to HitecVision for around $1 billion. The sale price is subject to closing adjustments and has additional upside contingencies of around $300 million based on potential increases in oil prices.
Exxon Mobil’s (XOM) SVP, Neil Chapman said, “We continue to high-grade our portfolio by divesting assets that are less strategic and focusing our investments on our advantaged projects that are among the best in the industry. Our development plans that prioritize Guyana, the U.S. Permian Basin, Brazil and LNG are focused on increasing earnings potential and generating strong cash flow to fund future capital investments, reduce debt and maintain a reliable dividend.”
The transaction is expected to close by the middle of this year. XOM will continue to retain its non-operating share “in upstream assets in the southern North Sea, and its share in the Shell Esso gas and liquids (SEGAL) infrastructure that supplies ethane to the company’s Fife ethylene plant.”
XOM said that the sale price of $1 billion will further its divestment plans allowing the company to focus on advantageous assets in its business portfolio. The company will retain its businesses relating to the marketing of fuels, lubricants, petrochemicals and natural gas in the UK. (See Exxon Mobil stock analysis on TipRanks)
On Feb. 22, JP Morgan analyst Phil Gresh reiterated a Buy rating and a price target of $59 (4% upside potential) on the stock. Gresh said, “While XOM is committed to spending $20-25B longer term, down from $30-35B…we think investors will care more about dividend coverage and de-leveraging…bottom line, we think the key message will be that the Upstream asset base is robust and the cyclical recovery is underway across the entire portfolio, driving de-leveraging.”
The rest of the Street is cautiously optimistic on the stock with a Hold consensus rating based on 6 Buys, 6 Holds, and 3 Sells. The average analyst price target of $53.25 implies around 6% downside potential to current levels.
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