ExxonMobil launches Asset Sale to Pay Off Debt

Exxon Mobil Corp. (XOM) is seeking buyers for its U.S. shale fields. According to Reuters, XOM plans to offload unproductive assets, raise cash, and pay off its huge debt. Shares of the American oil and natural gas explorers closed at $64.37 on November 15.

Barnett Shale Holdings

The proposed sale includes Exxon’s Barnett Shale holdings properties, which cover 2,700 wells across roughly 182,000 acres in North Texas. The properties are worth $400 million to $500 million. Bids are expected till December 2021, and Exxon expects to close the sale in January 2022.

According to Reuters, the Barnett shale assets gas production has reduced by 50% since 2016, to around 227 million cubic feet per day (mcfd) in the first half of this year.

In August 2021, Exxon had put approximately 5,000 natural gas wells in the Fayetteville Shale in Arkansas for sale. These included 844 operated and 4,104 non-operated wells. According to Exxon, these assets have reduced market value and declining production capacity.  

Exxon excluded several properties in Asia, Africa, the United States, and Europe from its development plan last year. Instead the company will now focus on production plans in Guyana, offshore Brazil, and the Permian Basin.

Debt Reduction

Around three years ago, Exxon had set a target to raise $15 billion from asset sales by December 2021. The company has received $557 million from sale proceeds up to June 2021 and has $2.15 billion in pending deals.

In 2020, Exxon posted a huge loss of $22.4 billion, and its total debt increased to $70 billion. In 2021, XOM managed to pay back more than $7 billion worth of debt, reducing the total to around $60.60 billion.

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Target Price

The Wall Street community has a Hold consensus rating on XOM stock with 5 Buys, 4 Holds, and 3 Sells. The average Exxon Mobil price target of $69.73 implies 8.33% upside potential to current levels. Shares have gained 68.7% over the past year.

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