ExxonMobil Corporation (XOM) intends to divest its retail fuel business in Japan to cope with the lackluster demand condition prevailing in the country, according to a report of the Yomiuri newspaper. The financial details of the deal were not disclosed and the company denied commenting on the news.
The report says Exxon plans to sell the network of more than 4,000 gas stations on a regional basis. However, two industry sources highlighted that any potential sale would involve approximately 10% to 20% of Exxon’s wholly owned units, as 80% to 90% of its gasoline stations are already certified to other firms.
The divestiture is conditional on the gas stations keeping current brand names and procuring oil products from the ExxonMobil group refineries. The world’s second biggest oil retailer, the ExxonMobil Japan group has already started the bidding procedure to sell the rights in Kyushu, southern Japan.
In recent years, Japan has been experiencing a decline in fuel demand with a decrease in population. Moreover, the world’s third biggest oil consumer is choosing more environmental friendly as well as energy-efficient technologies. Most importantly, overseas reallocation of operations by Japanese manufacturers has resulted in a significant contraction for oil demand.
ExxonMobil owns a strong and assorted portfolio of global energy businesses that offer attractive long-term growth opportunities. Overall, we remain optimistic on Exxon’s upstream business that draws significant earnings and believe it will retain its leverage to higher oil prices going forward.
However, although weak demand condition is definitely a concern, industry watchers expect Japan’s teeming refining industry to see an upside following new regulations this year aimed at boosting the country’s capacity to process heavy oil.
We currently maintain our long-term Neutral recommendation on Exxon shares and have a Zacks #3 Rank (short-term ‘Hold’ rating).
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
Zacks Investment Research
