ExxonMobil, Shell Agree To Sell Joint Venture in California for $4 Billion

Aerial View of Oil Drilling Operation in Kern County, California
Aera Energy's Belridge Producing Complex in California averages about 64,000 BOE/D.
Source: Getty Images

ExxonMobil and Shell announced on 1 September that they have agreed to divest their 25-year-old joint venture Aera Energy. The California-based subsidiary reported an average production rate of almost 95,000 BOE/D in 2021, representing nearly a quarter of the state's total oil and gas output.

German asset management group IKAV will acquire Aera for a cash sum of about $4 billion. Proceeds will be split between ExxonMobil, which holds a 48.2% share of Aera, and Shell, which holds a 51.8% ownership stake.

A statement from ExxonMobil said the divestment reflects its strategy to focus on low-cost oil and natural gas developments. Shell said in a separate statement that the decision to sell its share of Aera supports its effort to redeploy investments to assets with “high growth potential and a strong integrated value chain.”

Formed in 1997, Aera operates about 13,000 wells in California’s San Joaquin Valley from fields that in some cases have been producing oil for more than 100 years.

IKAV plans to retain Aera as the operator and said it will also invest in wind, solar, and battery storage to power Aera's upstream operations and lower its emissions. As the renewable build-out increases in scope, IKAV added that it could eventually tie these systems into California’s electric grid to bolster the state’s power generation capacity.

"In addition to our long-term goal and commitment to renewable energy, we recognize the continued need for oil and gas and for these assets to be operated safely and responsibly to facilitate a smooth and sustainable transformation of our energy supply. We advocate a coexistence between renewable and conventional energy for decades to come,” Constantin von Wasserschleben, chairman of IKAV, said in a statement on the acquisition.

In 2019, Hamburg-based IKAV acquired gas-producing assets from BP on more than 650,000 acres in Colorado and New Mexico. Its acquisition of Aera is expected to close by the end of this year.