Chevron to Pare Assets in Asia -- WSJ
August 05 2016 - 3:02AM
Dow Jones News
By Kane Wu and Dan Strumpf
HONG KONG -- Chevron Corp. is paring its Asia operations,
selling assets valued at up to $5 billion in an effort to raise
cash, according to people familiar with the situation.
The San Ramon, Calif., energy giant is set to begin selling its
offshore-China assets this month, the latest in a series of
divestments in Asia. The company is looking to raise up to $10
billion globally from asset sales, a big chunk of which will come
from its Asian upstream operations, as part of a broader effort to
cut costs and adapt to an environment of lower oil prices.
Among the assets Chevron is looking to sell is its stake in an
offshore oil-field production venture with China's state-owned oil
company Cnooc Ltd., which could fetch as much as $1 billion,
according to people familiar with the situation.
The asset could be attractive to a range potential bidders
including Chinese energy companies and sovereign-wealth funds,
according to people familiar with the situation.
Chevron is also shopping its geothermal assets in Indonesia, the
people said. The company is weighing bids valued at more than $2
billion, according to one person. Geothermal energy uses steam
extracted from underground to generate electricity.
Chevron is also selling natural-gas-field assets in Thailand,
according to people familiar with that deal.
In a statement, a Chevron spokesman said Friday the company "is
exploring potential interest in our non-operated 16% interest in
the Arthit development in the Gulf of Thailand. At this stage, no
decision has been made to sell our interest. We will only proceed
if we can realize attractive value for Chevron."
The proposed sales would mark a meaningful reduction in
Chevron's footprint in oil and gas production in Asia. The company
continues to operate a natural-gas production business in
Bangladesh and onshore in China, as well as offshore production in
Indonesia.
Some locales in Asia are still attracting investment from
Chevron.
Earlier this year, for example, a Chevron-led consortium
announced $37 billion in new spending to expand an oil project in
Kazakhstan known as Tengiz, one of the biggest energy investments
in years.
Chevron's retrenchment in Asia comes as the global energy
industry continues to cope with an oil-market slump that earlier
this year sent prices to 12-year lows. Prices rallied over the past
few months but re-entered a bear market this week.
Chevron reported a $1.5 billion loss in the latest quarter --
its third-straight period in the red -- as depressed oil prices
continued to drag on its results, although the company's revenue
decline was less than analysts expected. The company also took $2.8
billion of impairments and other noncash charges.
Chief Executive John Watson said the company's poor performance
reflected "our ongoing adjustment to a lower-oil-price world." In
the second quarter, the company's average sales price per barrel of
crude oil and natural gas liquids was $36, down from $50 a year
ago.
The Asia deals are part of a broader program of asset sales that
Chevron is undertaking. The company had said in January it is
looking to sell up to $10 billion in oil-field and other assets
through 2017. Of that target, it has already completed sales valued
at $1.4 billion.
Chevron is also cutting 8,000 jobs -- around 12% of its
workforce -- and slashing billions of dollars from its
capital-spending budget, it said last week.
The company said Thursday in a statement that its "strong
portfolio of projects and robust strategic position in the
Asia-Pacific region ensures we are well-placed to deliver on our
business plans, grow profitably in core areas, and build new legacy
positions in the region."
The two-year-long slump in oil prices has prompted many
international oil companies to scale back on ambitious production
projects and costlier overseas ventures. This is the case in Asia,
which is home to older, less productive oil and gas fields, said
Andrew Harwood, Asia-Pacific research director at energy consulting
firm Wood Mackenzie.
"The majors globally all have fairly aggressive divestment
targets," Mr. Harwood said. "Whereas in the past Asia was perhaps a
key part of their portfolios, it no longer holds the material
growth prospects it had before."
The assets could fetch rich bids from Asian buyers. "You have a
competitive environment where the local national oil companies are
becoming more assertive," Mr. Harwood.
Wood Mackenzie forecasts production by major western oil
companies in Asia to fall to 1.8 million barrels of oil equivalent
a day in 2020 from 2.3 million this year. The firm estimates those
companies own as much as $40 billion of assets in Asia that are in
the middle or late stages of their life span and could be eligible
for sale.
--P.R. Venkat in Singapore contributed to this article.
Write to Kane Wu at Kane.Wu@wsj.com and Dan Strumpf at
daniel.strumpf@wsj.com
(END) Dow Jones Newswires
August 05, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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