Yahoo Finance Strategic Asset Divestitures: 3 Energy Firms Setting the Trend
The energy market often sees companies shedding assets worth billions of dollars. This is basically a strategic move to optimize portfolios, improve financial performance and align with long-term business objectives.
One of the key motives for divesting non-core assets is to lower the debt burden. Proceeds from asset sales are often used to reduce debt levels, thereby improving financial flexibility and strengthening the balance sheet. Companies typically employ this strategy after major acquisitions or during times of financial stress. Another prime reason for divesting non-core assets is to allocate the proceeds toward resources that companies believe will generate substantial returns for shareholders in the long run.
Overall, divesting non-core assets is a strategic tool for oil and gas companies to enhance financial health, focus on profitable and strategic areas, and adapt to the evolving energy landscape.
3 Stocks in the Spotlight
It is advisable to keep an eye on major energy companies like Exxon Mobil Corporation XOM, BP plc BP and Occidental Petroleum Corporation OXY, which have been gaining from divesting non-core assets.
At present, all three stocks have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ExxonMobil is concentrating its investments primarily on the Permian Basin, the most productive region in the United States, and offshore Guyana. These areas have been identified by the leading integrated energy company for their promising returns and growth potential due to their low operational costs.
According to its latest corporate plan, ExxonMobil continues to enhance its portfolio value by selling non-core assets and seeking opportunities to invest in advantageous sites. A couple of its notable divestments made several years back were the sale of its global Santoprene business for $1.15 billion and its non-operated upstream assets in Norway for $4.5 billion.
BP is selling non-core assets to streamline its operations, lower its debt burden and fund investments in sustainable energy projects. This year, the British energy giant anticipates generating $2 billion to $3 billion from divestments and other proceeds. Alongside its first-quarter results announcement, BP stated that since the second quarter of 2020, it has realized $18.2 billion in divestment and other proceeds. The energy major is confident in its ability to achieve its goal of $25 billion in divestment and other proceeds between the latter half of 2020 and 2025.
Occidental Petroleum has announced plans to generate between $4.5 billion and $6 billion through a divestiture program within 18 months following the expected completion of its acquisition of Midland-based oil and gas producer CrownRock in the second half of 2024. With the proceeds from the divestment program, Occidental Petroleum will address a key portion of its debt burden and expects to maintain its investment-grade credit ratings.
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BP p.l.c. (BP) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
