One Sable investor argues Exxon sold a rich field that was too minor for Exxon
The investor's view: the idle field was minor next to Guyana and the Permian, cost an estimated $50 million to $70 million a year to hold, and exposed a global company to state rules.
Yet Another Value Podcast · Kontrarian Korner's Ben Kelleran on Sable Offshore $SOCBen Kelleran, an investor who follows Sable Offshore closely and says he has been trading its options, offers an outside investor's reading of why ExxonMobil sold the Santa Ynez field off California, not Exxon's stated reason. He is bullish on the buyer.
Kelleran argues the field was too minor for a company of Exxon's size. He calls it a great asset but says it did not move the needle next to Exxon's holdings in Guyana, in the Permian Basin, and in its other international operations.
He also points to the cost of sitting still. He estimates Exxon was paying about $50 million to $70 million a year to monitor and maintain the asset while it was shut in and producing nothing.
The third problem, in his telling, was California regulation. Kelleran says he has heard from other people that California tells energy companies that operate in the state that their international operations must also subscribe to California law. He hedges that description, saying, “I believe,” and adding that he is not accusing Exxon of wrongdoing, but he calls the setup a landmine for a company operating around the world.
That was the context for the question of why Exxon would hand over a potential big winner with financing. Kelleran's answer is that the field was an active drag on a multihundred billion dollar portfolio. He notes that other oil companies have sold or spun off California assets, and that Chevron moved its headquarters out of the state. He also points to refineries shutting down. Those pressures include emissions standards, which limit pollution from plants and fuels, and requirements to make special gasoline blends that only California requires.
Questions people ask
What is Sable Offshore?
Sable Offshore is a small, publicly traded oil company created to buy and restart the Santa Ynez field off California. It bought the field from ExxonMobil after it came public through a SPAC, a shell company that raises cash first and then finds a business to buy. It had no production revenue at the time of the discussion because the field had not yet restarted.
Why was Santa Ynez shut down for so long?
The field was shut in after a 2015 pipeline spill near Santa Barbara coated the coast with oil. With the pipeline closed, oil had no approved way to reach refineries, so the platforms stopped producing. Restarting required fixing and testing the pipes and winning approvals from regulators and the courts.
Do other big oil companies still operate in California?
Yes, but less than before. California still produces oil, mostly from onshore wells in Kern County, and still has refineries that make its special gasoline. Some large companies have sold fields, moved offices, or closed plants, saying taxes, pollution limits, and fuel rules make the state costly and unpredictable.