Exclusive-China's Sinochem plans to exit US shale JV with Exxon, sources say

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, valued upwards of $2 billion, people familiar with the matter told Reuters.

Sinochem in recent weeks hired investment bankers at Barclays to advise it on the potential sale of its stake in the Wolfcamp joint venture, one of the sources said. Exxon, majority owner and operator of the JV, has the right of first refusal in the sale, the source added.

The sources cautioned that the sale considerations are at an early stage and a deal with Exxon or other interested parties, which could include rival Asian national oil corporations, is not guaranteed. They said Sinochem could still decide to retain its stake. The sources requested anonymity to discuss confidential talks.

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

A sale would end Sinochem's over 11-year involvement in the Permian Basin of Texas, the heartland of the U.S. shale revolution. Meteoric production growth in the region over those 11 years has catapulted the U.S. to the top of global oil production and export charts.

Sinochem acquired the stake from Pioneer Resources in 2013 for $1.7 billion, when production on the roughly 83,000 net acres (33,590 net hectares) of land under the JV was just about 10,000 barrels of oil equivalent per day (boepd).

Most recent output from the land averaged over 44,000 boepd, of which roughly 75% is oil, one of the sources said.

Exxon completed a $60 billion purchase of Pioneer in May, the biggest deal in a record-breaking wave of consolidation in the U.S. oil industry. The deal made Exxon the top producer in the Permian Basin.

Sinochem has been re-evaluating its struggling oil exploration and production business in recent years to shift focus to new materials and life sciences, its former chairman, Frank Ning, said in 2017.

The Wolfcamp JV is Sinochem's largest oil and gas producing asset outside China, according to a company source.

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 brought Sinochem new headaches as the company was forced to shutter several oil refineries in eastern China earlier this year to stem losses amid sluggish Chinese fuel demand, Reuters has reported.

(Reporting by Shariq Khan in New York, additional reporting by Chen Aizhu in Singapore; Editing by Jonathan Oatis)