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Chevron to Put North Sea Assets on Sale, Optimize Portfolio

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Chevron Corporation (CVX - Free Report) is set to put up many of its North Sea oil and gas assets for sale, in a bid to streamline portfolio. The assets it intends to offload include Britannia and its satellites, along with Alba, Alder, Captain, Elgin/Franklin and Erskine fields. The move is part of Chevron’s strategic review of global portfolio to determine the competitiveness of all its projects.

The decision seems to be a prudent one as extracting oil from North Sea is not so economical because production costs are much higher than the returns. Even other biggies like Bp plc (BP - Free Report) and Royal Dutch Shell plc (RDS.A - Free Report) have jettisoned their non-core assets in the region. Early last year, Shell offloaded a large chunk of its North Sea assets to smaller rival Chrysaor Holdings Ltd. for $3.8 billion. BP also divested 25% of stake in the Magnus Field to EnQuest PLC (ENQUF - Free Report) .

Notably, output from North Sea accounts for just about 3% of Chevron’s total production, providing around 50,000 barrels of oil and 155 million cubic feet of natural gas a day. Instead, Zacks Rank #1 (Strong Buy) company wants to sharpen its focus on the lucrative shale exploration in Permian, along with some of its major projects in the Gulf of Mexico and Kazakhstan. You can see the complete list of today’s Zacks #1 Rank stocks here.

However, while the U.S. energy giant has taken the decision to kick off the marketing process of its non-core North Sea assets, it does not plan to make a complete exit from the North Sea region. The company intends to retain its stakes in the West of Shetland, Clair and Rosebank — where it holds 19.4% and 40% stakes, respectively — as drilling activities in these regions have started to ramp up. These areas are relatively unexplored with enough materiality and longevity. In fact, the oil and gas output in the U.K. North Sea is anticipated to hit eight years high in 2018 on the back of rising production from the Clair Ridge and Mariner developments off Shetland. Just a couple of days back, BP inked a deal with ConocoPhillips to raise its interest in the Clair field by acquiring 16.5% stake in the same.

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