Exclusive-Chevron to sell swath of Permian assets valued at more than $1 billion -sources

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(Reuters) -Chevron Corp is looking to sell two collections of conventional oil and gas fields in the Permian Basin valued at more than $1 billion combined, three sources told Reuters.

Chevron (NYSE:CVX) confirmed that it is marketing conventional assets in the Permian Basin, but did not specify the value of the assets.

U.S. oil futures (CLc1) have soared more than 50% so far this year, prompting companies to try to sell assets in Permian Basin of Texas and New Mexico, the country’s largest oil field.

Chevron is looking to sell lower-value assets, while some majors, like Royal Dutch Shell (LON:RDSa) are considering exiting the formation entirely.

Shell is looking to exit the Permian to invest in energy transition, while Chevron’s focus is investing in its highest performing assets.

Chevron has retained an investment bank to market some Permian oil and gas fields valued at $879 million and has additional assets of more than $200 million available for sale elsewhere in the basin, the sources said.

Chevron shares closed about 1% higher on the day at $104.74, moving late in the session after Reuters reported the planned divestures.

“The big picture is that Chevron has one of the largest and most advantaged positions in the Permian and is able to test the capital discipline of the industry with what it would consider marginal assets that are a much smaller package than the Shell potential offering,” said Paul Sankey, lead analyst at Sankey Research in New York.

Initial bid proposals were due by June 10, with a planned July 1 sale date for the larger package. The assets are operated by Chevron and Occidental Petroleum Corp (NYSE:OXY) and span 57,000 net acres (231 square kilometers) with production of about 10,100 barrels of oil equivalent per day.

“We can confirm that Chevron is marketing conventional assets in the Permian Basin,” a spokeswoman said in a statement emailed to Reuters. “As our senior executives have said, Chevron has an ongoing program to evaluate and prioritize its assets to ensure that they align with the company’s long-term business strategies.”

Together, the assets Chevron is marketing could fetch as much as $1.2 billion, based upon the strength of oil futures, according to one of the people.

The larger package of assets is well positioned for long-term implementation of carbon capture and sequestration, according to the people. The technology is one that some fossil fuel companies are using to reduce or offset carbon emissions.

Chevron has been evaluating other assets in the Permian and elsewhere, one of the people said, and could divest older assets over the year as it looks to boost investments in energy transition.

Chevron has previously said it is fine-tuning its oil holdings.