The 25-year relationship between Exxon Mobil Corp. and Shell Plc, which was one of the biggest oil producers in the state, has come to an end with the sale of their California oil joint-venture Aera to German asset management IKAV for $4 billion.
The sale shows the two businesses’ decision to exit aging energy facilities at a time when high oil and gas prices favor fresh business ventures. The sale of the San Joaquin Valley property was reportedly the subject of advanced negotiations, according to reporters this week.
The agreement places a business with stakes in both conventional and renewable energy in command of a functioning artifact of California’s early oil and gas production. IKAV is in charge of 2.5 billion euros ($2.49 billion) and operates in the oil and gas, the geothermal, wind, and solar sectors. It runs a natural gas company in Colorado that it bought from BP two years ago.
Subject to regulatory approvals, the acquisition is anticipated to close in the fourth quarter of 2022. According to Shell, the transaction will result in an impairment charge of $300 million to $400 million.
According to its website, IKAV purchases and keeps assets with high cash yields to optimize returns on its investments. It constructed a solar power facility in Italy last year and acquired the majority of Metaenergia, an Italian company that runs gas-fired power facilities.
Exxon, which controlled 48% of Aera, has been selling off its assets in order to concentrate on projects in Guyana, the offshore areas of Brazil, and liquefied natural gas. With this agreement, it will be easier to sell assets worth $15 billion.
According to Liam Mallon, president of Exxon’s Upstream Company, the Aera sale falls within a strategy of concentrating investments “on low-cost-of-supply oil and natural gas to meet consumer demand and produce value for our shareholders.”
The transaction is in line with Shell Upstream Director Zoe Yujnovich’s plan to concentrate “on locations with great development potential and a strong integrated value chain,” she added.
In central California, eight onshore fields operated by Aera, which was founded in 1997, are in operation. According to the statement, the company generated roughly 95,000 barrels of oil and gas per day in 2021.
Both oil producers are continuing to run their other businesses in California, such as chains of gas stations.
