By Shariq Khan
NEW YORK (Reuters) – Chinese state-backed oil and chemicals company Sinochem plans to sell its 40% stake in a U.S. shale joint venture with oil giant ExxonMobil (NYSE:), worth more than $2 billion, people familiar with the matter told Reuters.
Sinochem has hired investment bankers from Barclays in recent weeks to advise on the possible sale of its stake in the Wolfcamp joint venture, one of the sources said. Exxon, majority shareholder and operator of the JV, will have 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, including potentially rival Asian national oil companies, is not guaranteed. They said Sinochem could still decide to retain its stake. The sources requested anonymity to discuss confidential conversations.
Sinochem, Exxon and Barclays did not immediately respond to requests for comment.
A sale would end Sinochem’s more than eleven-year involvement in the Texas Permian Basin, the heart of the American shale revolution. The region’s rapid production growth over those eleven years catapulted the US to the top of the global oil production and export lists.
Sinochem acquired Pioneer Resources’ stake for $1.7 billion in 2013, when production on the approximately 83,000 net acres of land under the joint venture was only about 10,000 barrels of oil equivalent per day (boepd).
The most recent output from the country averaged more than 44,000 boepd, of which roughly 75% is oil, one of the sources said.
Exxon completed a $60 billion acquisition of Pioneer in May, the largest deal in a record-breaking wave of consolidation in the U.S. oil industry. The deal made Exxon the top producer in the Permian Basin.
Sinochem has been reevaluating its struggling oil exploration and production businesses in recent years to shift focus to new materials and life sciences, former chairman Frank Ning said in 2017.
The Wolfcamp JV is Sinochem’s largest oil and gas producing asset outside China, according to a company source.
The company has also been trying to sell its 40% stake in Brazil’s Peregrino oil field since 2017.
A state-mandated merger with ChemChina in 2021 brought new headaches to Sinochem as the company was forced to close several oil refineries in eastern China earlier this year to stem losses from sluggish Chinese fuel demand, Reuters reports .
