Exxon Loses $2 Billion On California Oil Properties

Losses from the heavily leveraged sale of a struggling California offshore oil and gas field that has been idled since a pipeline disaster in 2015 might reach $2 billion for Exxon Mobil Corp (XOM.N).

This transaction is part of Exxon’s ongoing effort to divest itself of underperforming companies and follows an unsuccessful attempt to revive production at the facility this year. Officials in Santa Barbara said “no” in March when Exxon proposed reopening its oil port and sending oil to inland refineries in tanker trucks.

Exxon Loses $2 Billion On California Oil Properties
Exxon Loses $2 Billion On California Oil Properties

With a five-year loan, Exxon will finance 97% of the $643 million acquisition price for Sable Offshore, a blank check business created by industry veteran James Flores. To buy existing firms, blank check corporations obtain capital. Sable revealed in a document that Exxon may reclaim the whole business if Flores fails to resume production at the Santa Ynez field by the beginning of 2026.

According to a Sable investor presentation, Flores plans to apply for the necessary permissions to get Santa Ynez up and running again in 2024, at which point it is expected to produce roughly 28,100 barrels of oil and gas per day. Presentation data revealed that there is room for at least another hundred wells in the field.

Seven years ago, a breach in a subsea pipeline spilled 2,400 barrels of Santa Ynez oil into the Pacific Ocean. This caused the pipeline to be shut down. The pipeline was purchased by Exxon from its previous owner, and the company has been attempting to restart production.

Three oil and gas platforms, as well as a pipeline and processing facilities, are part of the Santa Ynez sale, which stretches out to sea as far as nine miles (14 kilometers) from the California coast. In 1981, after the first platform had been constructed in the 1970s, oil production had begun.

Flores has extensive experience in the buy-and-sell market. Beginning with Flores & Rucks Inc in 1992, he has led five more oil firms in the United States, frequently selling them for large profits. In 2020, when oil prices plummeted, his final company, Sable Permian Resources, filed for Chapter 11 bankruptcy.

Through an IPO last year, he was able to raise $287.5 million for the business that would eventually become Sable Offshore. According to Sable’s SEC filings, the company has until March 1 to close a sale or refund IPO investors.

 

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