Exxon Set To Lose $2B On California Offshore Field Sale

U.S. supermajor ExxonMobil is expected to lose about $2 billion when it sells an oil field off the coast of California.

Operations at the field were halted following an oil spill in 2015 that leaked over 120,000 gallons of oil into the Pacific Ocean.

Exxon attempted and failed to restart production from the field earlier in 2022. Santa Barbara officials in March rejected an Exxon plan to restart operations and ship oil via dozens of tanker trucks each day to inland refineries. The supermajor decided to shed all its businesses that were not performing well to cut operating costs and improve returns after a historic loss in 2020.

Now, Exxon decided to sell the offshore oil and gas field to Sable Offshore for $643M. Sable Offshore is a blank check company or one that raises money for acquiring businesses founded by James Flores. It will loan 97 percent of the $643 million from Exxon under a five-year loan.

As part of the sale, Sable will obtain three oil and gas platforms in the Santa Ynez oil field, roughly nine miles offshore, along with processing facilities for oil and gas, and a pipeline. The first platform was built in the 1970s began producing oil in 1981.

Sable will seek permits to restart Santa Ynez and expects to pump about 28,100 barrels of oil and gas per day beginning in 2024. The field has 112 wells and the potential for at least another 100 wells.

It is worth noting that if the company fails to restart production at the Santa Ynez field by the start of 2026, Exxon could take back the entire operation.

As for James Flores, he has a long history of buying and selling companies. He has run five U.S. oil companies beginning with Flores & Rucks in 1992 and often sold his companies at sizeable gains. His last business did not do so well as it had to file for Chapter 11 bankruptcy when oil prices tumbled in 2020.

It is also worth stating that Flame Acquisition Corp. entered into a definitive agreement to combine with energy company Sable Offshore at an enterprise value of $883 million.

The condition of the combination was the purchase of the Santa Ynez Unit offshore oil field and its associated onshore facilities off the coast of California. The combined company is expected to trade on the NYSE once the deal is completed.

Last year, he raised $287.5 million through an initial public offering for the company that became Sable Offshore. Sable must complete a deal by March 1 next year or return the money to its IPO investors.

To contact the author, email bojan.lepic@rigzone.com