HOUSTON, Nov 6 (Reuters) – Exxon Mobil Corp (XOM.N) will suffer a $2 billion loss on the highly leveraged sale of a troubled offshore oil and gas field in California, dormant since the oil spill. a pipeline in 2015.
The sale comes after a failed bid this year to restart production at the site and as Exxon weeds out underperforming companies. In March, Santa Barbara officials rejected a plan by Exxon to restart operations and ship oil via dozens of tankers each day to interior refineries.
Sable Offshore, a blank check company founded by industry veteran James Flores, will borrow 97% of the $643 million purchase price from Exxon under a five-year loan. Blank check companies raise funds to acquire operating businesses. If Flores fails to restart production at the Santa Ynez field by early 2026, Exxon could take over the entire operation, Sable revealed in a filing.
Exxon was not immediately available to comment on the terms of the agreement. It accelerated asset sales to reduce operating costs and improve returns after a historic loss in 2020.
Flores will apply for permits to restart Santa Ynez and plans to pump about 28,100 barrels of oil and gas per day starting in 2024, according to a presentation to investors from Sable. The field has 112 wells and the potential for at least 100 more wells, his presentation showed.
Seven years ago, an undersea pipeline leak sent 2,400 barrels of Santa Ynez oil into the Pacific Ocean, causing a shutdown. Exxon acquired the pipeline from its owner and attempted to resume production.
The Santa Ynez sale includes three oil and gas platforms located 9 miles off the California coast, a pipeline and oil and gas processing facilities. The first rig was built in the 1970s and started producing oil in 1981.
Flores has a long history of buying and selling businesses. He ran five US oil companies, starting with Flores & Rucks Inc in 1992, and often sold his companies with big gains. His latest company, Sable Permian Resources, filed for Chapter 11 bankruptcy in 2020 as oil prices plummeted.
Last year, he raised $287.5 million through an initial public offering for the company that became Sable Offshore. Sable must strike a deal by March 1 or return the money to its IPO investors, according to its documents.
Reporting by Gary McWilliams; Editing by Lisa Shumaker
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