Chevron reportedly seeking to sell pipeline assets in US’ DJ Basin

Chevron is reportedly seeking to sell a set of pipeline assets in the Denver-Julesburg (DJ) Basin. Citing sources familiar with the matter, Reuters reported on October 3 that the assets were likely to fetch more than $2bn.

According to the Reuters report, Bank of America (BofA) has been working to solicit potential interest in the assets in recent weeks. The sources were cited as saying the assets had been largely inherited in Chevron’s acquisition of Noble Energy in 2020 and its subsequent takeover of Noble's midstream business a year later.

Some of the sources went on to say that the assets generate around $200mn of earnings before interest, taxes, depreciation and amortisation (EBITDA). The estimated price tag of upwards of $2bn is based on sales of similar assets, the report said.

The sources asked not to be named because the talks are private. As is common with such talks, a sale is not guaranteed and the sources noted that Chevron could end up retaining some or all of the assets.

Chevron is one of the largest producers in the DJ Basin – a shale region that is largely located in Colorado but also extends into Wyoming.

Reports of the pipeline sale come as the supermajor seeks to sell off non-core assets in a bid to be competitive amid ongoing oil price uncertainty. It also recently completed its $55bn acquisition of Hess, in a move likely to sharpen its focus on shedding non-core assets.

“I think you can expect us to challenge ourselves to only invest in the best opportunities, to divest assets out of the portfolio that don’t compete for capital in a tight capital environment and might fit better for others,” Chevron’s chairman and CEO, Mike Wirth, said on the company’s second-quarter earnings call, held on August 1. He added that Chevron could be expected to focus on delivering strong returns and free cash flow to support distributions to shareholders across a “really advantaged” portfolio that it would continue to seek to strengthen via new opportunities.

Separately, Chevron named a new head of global exploration, Kevin McLachlan, on October 7, to replace Liz Schwarze, who is preparing to retire in February. This comes after Wirth said on the second-quarter earnings call that he was not happy with the company’s exploration results over the last few years. Efforts to step up exploration can be expected to follow.