Exxon Puts Iraq Field Up for Sale With Debt Mountain Looming
(Bloomberg) -- Exxon Mobil Corp. is considering selling its stake in Iraq’s West Qurna-1 oil field in a sign that the supermajor is willing to part with one its marquee oil fields in the Middle East to reduce the mountain of debt accumulated last year.
Iraq’s oil ministry took the unusual step of saying it’s in talks with U.S. companies about the possibility of them buying Exxon’s 32.7% stake in the field in southern Iraq, near the city of Basra. China’s oil giants China National Petroleum Corp. and CNOOC Ltd. were considering buying the stake, Bloomberg News reported last year.
Exxon declined to comment on any potential sale.
West Qurna-1 was considered one of the oil industry’s glittering prizes in the reconstruction of Iraq following the Second Gulf War, with Exxon becoming lead contractor in 2010. But tough contractual terms, payment delays, OPEC production cuts and political instability have dulled its appeal in recent years. Meanwhile, Covid-19 had a crushing impact on Exxon’s finances, causing its debt to balloon to more than $70 billion and prompting two downgrades in less than a year from Moody’s Investors Service.
Asset sales are a key part of Exxon’s strategy to reduce that debt, as well as defend its $15 billion-a-year dividend. Those goals are within easier reach now that Brent crude has rebounded to more than $66 a barrel, up 29% this year. Exxon’s stake in West Qurna-1 could fetch at least $500 million, Bloomberg reported in November, citing people familiar with the matter.
While the Iraqi field is one of the world’s biggest, with expected recovery reserves of more than 20 billion barrels, ongoing investment is needed to bring those barrels to market. In particular, its future production capacity may be dependent on a major water-injection project that has encountered multiple delays.
Exxon has slashed its annual capital spending by some $10 billion a year all the way out to 2025, saying it will focus on its core projects in Guyana and the Permian Basin. That may have pushed West Qurna-1 down the pecking order for the limited capital the company now has available for new developments.
The remaining owners of the field are PetroChina with a 32.7% stake, Japan’s Itochu Corp. with 19.6% and PT Pertamina with 10%.
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