Ownership of some oil and gas blocks in Asia may be about to change hands after two independent companies in the United States –Newfield Exploration Co. and Hess Corp. – completed a review of their strategies earlier this year. The move has caught the attention of national oil and gas companies in the region as well as private firms, which are keen to acquire stakes in blocks that are on offer in China and Southeast Asia, but no deals have been completed yet.
Asian Upstream Assets Marginalized by Changing Priorities
Newfield, with offshore oil and gas assets in China and Malaysia, has shifted its attention away from international operations. The firm is transiting to a North America-focused liquids company and is pursuing strategic alternatives to maximize the value of its international offshore assets, according to a presentation by Newfield in July.
"The decision to pursue alternatives for Newfield's international assets follows a comprehensive review of the Company's strategy, asset base and future direction … now is the right time to become a North American-focused operator,” Lee K. Boothby, Newfield chairman, president and CEO said in a press release Feb. 13. Newfield has engaged Goldman, Sachs & Co. as its advisor for the disposal of its foreign assets.
International assets are not that critical to Newfied as they accounted for only 6 percent of its total reserves in 2012, 15 percent of its estimated production in 2013 and 17 percent of the firm’s capital budget in the same year, data from Newfield’s website showed.
As for Hess, the company has set itself the objective of becoming a pure exploration and production (E&P) firm by 2014. The shift resulted from a multi-year strategic transformation, which upon completion, will enable Hess to have a focused portfolio of higher growth and lower risk E&P assets. The company plans to pursue “additional E&P asset sales by pruning [its] Asian portfolio to focus on the long lived, low risk Malaysia/Thailand Joint Development Area (MTJDA) and the North Malay Basin,” Hess said in its March 4 letter to shareholders and added in an April 15 letter that it has begun a “sale process for [its] mature E&P assets in Indonesia and Thailand.”
Hess sees the North Malay Basin as one of the six core E&P assets that will drive its future production growth for the firm, which is a joint operator of MTJDA through its equal joint venture Carigali Hess with Petroliam Nasional Bhd (Petronas).
Accordingly, Hess completed the sale of its 2.72 percent stake in the Azeri, Chirag and Guneshli (ACG) fields and a 2.36 percent interest in the associated Baku-Tbilisi-Ceyhan pipeline to India’s ONGC Videsh Ltd. for $1 billion in March. Hess also sold its Energy Marketing business – which supplies natural gas and electricity to non-residential energy customers in the eastern part of the United States – for $1.025 billion to Centrica’s subsidiary Direct Energy.
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