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Exxon's $2bn UK business 'attractive', but Shell alignment needed, analyst says

ExxonMobil’s UK North Sea assets are an “attractive” proposition due to their low running costs, an analyst has said amid speculation the US major is trying to sell the portfolio.

Neivan Boroujerdi, principal analyst, North Sea upstream, at Wood Mackenzie, said the business was “highly cash generative, with operating costs around half the UK average”.

Woodmac valued the portfolio at around $2 billion.

But Mr Boroujerdi pointed out that investment plans would need to be “aligned” with Shell, because Exxon’s UK assets are operated through a 50-50 joint venture with the Anglo-Dutch major.

He said: “A proposed UK exit was expected. We value the portfolio at around US$2 billion.

“Combined with its Norwegian assets, which ExxonMobil recently announced its intention to market, could see the supermajor reach one-third of the way to meeting its US$15 billion divestment target.”

He added: “In a recent report, we highlighted the UK and Norway amongst nearly US$50 billion worth of assets we think the company could divest. An active phase of portfolio high-grading will complement and strengthen its aggressive investment-led strategy, centred around its flagship projects in Guyana, US tight oil and liquefied natural gas.

“Nevertheless, the UK business is attractive. It is highly cash generative, with operating costs around half of the UK average. Most of the value lies in three main hubs: Penguins, Shearwater and Gannet. Focus for any new buyer will be on increasing recovery and pushing out abandonment costs.

“But given the portfolio is operated through a 50-50 joint venture with Shell, investment plans will need to be aligned with the Anglo-Dutch major, which is juggling opportunities in its own global portfolio.”

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