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Conoco, Oxy Among Norway Fund’s Divestment Targets

ConocoPhillips, Occidental Petroleum, and Devon Energy are on the list of exploration and production companies that Norway’s sovereign wealth fund will divest in a plan aimed at reducing its exposure to the highly volatile oil sector.

Bloomberg has listed all of the companies that the fund will exit, and these also include Pioneer Natural Resources, EOG Resources, Concho Resources, Marathon Oil Corp, and Apache Corp., as well as Chinese CNOOC, Japanese Inpex, Canadian Natural Resources, Diamondback Energy, Australian Santos and Woodside Petroleum, India’s ONGC, and Swedish Lundin.

The list effectively means Norway’s sovereign wealth fund will exit U.S. shale—a market that many others are eager to expand in. However, in this particular respect, the divestment is timely. Shale oil production growth has been slowing down, and overall U.S. production has been down, too, at a time when prices are once again on the slide, to which U.S. shale operators are more vulnerable than vertically integrated industry players.

Norway’s sovereign wealth fund, however, is keeping those in its portfolio. The fund first announced its divestment plans two years ago, sending shock waves through oil markets at a time when the industry had just started to get back on its feet after the 2014 oil price collapse.

At the time, the news sparked fear that other sovereign wealth funds could follow suit and exit the oil and gas industry, hurting it while it was trying to recover from another blow.

Eventually, the divestment was reduced substantially, possibly in recognition of the fact that first, pure-play oil stocks did not make up a huge part of the fund and second, some of these stocks brought in nice returns. Finally, the fund and the government settled for the divestment of only pure-play oil production companies, keeping the stakes in integrated Big Oil sector players.

As of last month, Norway’s holdings in crude oil producers, as classified by the fund’s benchmark index provider FTSE Russell, made up 0.8 percent of its equity benchmark index. The total value of the divestments is about $5.9 billion.

By Irina Slav for Oilprice.com

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