Chevron Corporation (CVX - Free Report) is set to sell its last stake in the oil exploration license offshore Norway, becoming the first oil supermajor to exit the Norwegian continental shelf. The company will offload its 20% interest in the PL859 exploration license in Norway’s Arctic to a Norwegian company DNO. The financial terms of the transaction have been still kept under wraps. Subject to satisfactory conditions and regulatory approvals, the deal is set for closure in a few months.
While Chevron exits Norway completely through this transaction, its peers including Royal Dutch Shell plc (RDS.A - Free Report) , BP plc (BP - Free Report) and Exxon Mobil Corporation (XOM - Free Report) have also scaled down their footprint in the country amid the crude slump, in order to deepen their focus on other lucrative prospects.
The deal brings Chevron a step closer to its intention of withdrawing from the aging North Sea, in a bid to streamline portfolio. 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 since production costs are much higher than returns.
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, the 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.
In sync with its objectives, Chevron decided to put up many of its North Sea oil and gas assets for sale this July. In fact, recently, the company also inked a deal to divest its entire stake in the Rosebank oilfield to Equinor. While Chevron has already clinched a deal with Equinor for its Rosebank properties, it is yet to offload other North Sea assets like Britannia and its satellites, along with Alba, Alder, Captain, Elgin/Franklin and Erskine fields. The marketing of these properties is still at a nascent stage. If these planned sales are properly executed, the company will just be left with 19.4% interest in the Clair field for its U.K. portfolio, which is operated by BP.
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