Exxon, Shell sell California oil assets for $4 billion to IKAV

Exxon Mobil Corp (XOM.N) and Shell Plc (SHEL.L) on Thursday confirmed the sale of their California oil joint-venture Aera to German asset manager IKAV for $4 billion, ending a 25-year-long partnership that was one of the state’s largest oil producers.

The sale reflects the two companies move out of mature energy properties at a time when high oil and gas prices favour new deals. Reuters this week reported the oil giants were in advanced talks on a sale of the San Joaquin Valley property.

The deal puts a company with conventional and renewable energy investments in charge of a living relic of California’s early oil and gas production. IKAV has 2.5 billion euros ($2.49 billion) under management and owns wind, solar, geothermal and oil and gas operations. It operates a Colorado natural gas business acquired two years ago from BP.

The transaction is expected to close in the fourth quarter of 2022, subject to regulatory approvals. Shell faces a $300 million to $400 million impairment charge as a result of the sale, it said.

IKAV buys assets with strong cash yields and holds them to maximize returns to its funds, according to its website. Last year, it built a solar plant in Italy and took a majority stake in Metaenergia, an Italian operator of gas-fired power plants.

Exxon, which owned 48 per cent of Aera, has been divesting operations as it focus on Guyana, Brazil offshore and liquefied natural gas projects. The deal brings its closer to a target of selling $15 billion in assets.

The Aera sale fits a strategy of focusing investments “in low-cost-of-supply oil and natural gas to meet consumer demand and create value for our shareholders,” said Liam Mallon, president of Exxon’s Upstream Company, in a statement.

Shell Upstream Director Zoe Yujnovich said the sale follows a strategy to focus “on positions with high growth potential and a strong integrated value chain”.

Aera was formed in 1997 and has operations in eight onshore fields in central California. In 2021, the company produced about 95,000 barrels of oil and gas per day, according to the statement.

Both oil producers are keeping their other California operations, including gas station chains.

($1 = 1.0057 euros)