Sinochem Plans to Sell U.S. Shale Stake

By Shariq Khan

NEW YORK (Reuters) – Chinese state-backed oil and chemicals company Sinochem is planning to sell its 40% stake in a U.S. shale joint venture with oil major Exxon Mobil (NYSE:XOM). The stake is valued upwards of $2 billion, according to sources familiar with the matter.

Sinochem has recently hired investment bankers at Barclays to advise on the potential sale of its stake in the Wolfcamp joint venture. Exxon, the majority owner and operator of the joint venture, has the right of first refusal.

Sources caution that the sale considerations are in the early stages, and a deal with Exxon or other interested parties, possibly rival Asian national oil corporations, is not guaranteed. Sinochem may still decide to retain its stake, and sources requested anonymity to discuss confidential talks.

Sinochem, Exxon, and Barclays did not respond immediately to requests for comment.

A sale would conclude Sinochem’s over 11 years in the Permian Basin of Texas, a key area of the U.S. shale revolution. The region’s production surge has propelled the U.S. to the forefront of global oil production and exports.

Sinochem acquired its stake from Pioneer Resources in 2013 for $1.7 billion when production on the approximately 83,000 net acres was about 10,000 barrels of oil equivalent per day (boepd). Recent output averaged over 44,000 boepd, with around 75% being oil.

Exxon finalized a $60 billion purchase of Pioneer in May, marking the largest deal in a record-breaking wave of consolidation in the U.S. oil sector, positioning Exxon as the top producer in the Permian Basin.

Sinochem has been reassessing its oil exploration and production business in recent years, looking to shift focus to new materials and life sciences, as stated by its former chairman, Frank Ning, in 2017.

The Wolfcamp joint venture represents Sinochem’s largest oil and gas producing asset outside of China. The company has also been trying to sell its 40% stake in Brazil’s Peregrino oilfield since 2017.

A state-mandated merger with ChemChina in 2021 has added challenges for Sinochem, as the company had to close several oil refineries in eastern China earlier this year to mitigate losses amid sluggish domestic fuel demand.