Iraq has said that it is engaging US energy companies regarding the acquisition of Exxon Mobil Corp (NYSE:XOM) stake in the West Querna-1 oil field. This is the first indication that Exxon Mobil will be willing to sell one of its top oil filed in the region to reduce the huge debt accumulated in 2020.
Exxon Mobil selling its stake in West Qurna-1 oil field
The Iraqi oil ministry said that it was engaging US companies regarding Exxon Mobil’s 23.7% interest in the oil field located in southern Iraq near Basra. However, the ministry didn’t indicate the companies it was in discussions with over a potential purchase. It is important to note that Chinese oil giants CNOOC Ltd. and China national petroleum Corp could also be interested in acquiring the stake. Exxon Mobil is yet to offer a comment regarding the potential sale of the stake.
Notably, West Qurna-1 is among the oil industry’s marquee oil fields in Iraqi’s reconstruction post-second Gulf War, and Exxon Mobil was the lead contractor from 2010. However, in recent years payment delays, tough contractual terms, political instability, and OPEC oil production cuts have dulled the oil’s appeal. The COVID-19 pandemic crushed Exxon Mobil’s finances leading to ballooning debt of over $70 billion. This resulted in two downgrades within a year from Moody’s Investor Service.
The asset sale part of Exxon’s debt reduction strategy
Asset sales are vital in the company’s debt-reduction strategy and defending its $15 billion dividends per year. The company could easily attain those goals now that Brent Crude has recovered to overn$66 per barrel, which is a 29% year to date. According to people familiar with the matter, Exxon Mobil’s interest in West Qurna-1 is estimated at around $500 million.
Although the West Qurna-1 oil field is currently among the largest in the world, with recovery reserves of almost 20 billion barrels, there is a need for more investment to bring the barrels to the market. Most importantly, future production capacity could depend on a major water-injection project that has seen multiple delays.