Sheila McNulty Watch what independent oil companies do with the majors’ cast-offs

The majors have a history of selling what they believe are their “cast offs” to the small, independent oil and gas producers because they see little value in them. When they all left the US for global markets, writing the US off as “mature” back in the 1970s, the independents picked up the pieces and carried on.

Not only did many continue to make a profit over the years, but they came up with new technology and expertise that cracked the code to making shale gas and now shale oil economic. The US is now a virtual boom town for energy resources.

So it is interesting to see that the majors, now back in the US and rushing to pick up shale assets from the independents, are selling their conventional assets in both the US and Canada.

ExxonMobil said on Monday it was selling conventional oil and gas assets in Canada to Husky Energy for $860m. The assets, in Alberta and British Columbia, carry 21,900 barrels of oil equivalent per day of production and 113m boe of proved and probable reserves, based on Husky’s estimate.

That sale follows Exxon’s decision last week to sell nine oil and gas fields in the shallow waters of the Gulf of Mexico to Energy XXI for $1bn.

In addition, Shell is looking to sell its south Texas conventional gas assets as it focuses on growing and upgrading its North America tight gas portfolio. The company noted it was not selling assets in the Eagle Ford Shale, the latest hotspot for production from unconventional shale resources.

Indeed, the majors have recently joined the rush by foreign energy companies to buy such assets. Chevron announced in November a $4.3bn deal to buy Atlas Energy, which has a strong position in a major shale field in Pennsylvania. Last year, Exxon struck a $41bn deal to buy XTO, a major unconventional gas producer, in the biggest such deal to date.

The interesting thing about all this is who is picking up the majors’ conventional “cast offs” and what they will do with it. There is still much potential to squeeze resources out of these assets. The generally accepted estimate is that two-thirds of the world’s oil remains in the ground.

Indeed, Occidental Petroleum has made a career out of exploiting mature assets to the very last drop. And as technology and expertise grows, the potential of getting more out of conventional resources will increase. That is why Apache rushed to pick up largely ignored assets from BP this past summer.

So while it is the majors that always make the news, it is worth bearing in mind that the little guys that are really worth watching.