Exxon Mobil Corp. agreed to divest some of its U.K. North Sea upstream assets on Feb. 24 in a deal potentially worth up to $1.3 billion as the U.S. oil major looks to free up capital for projects elsewhere.

“We continue to high-grade our portfolio by divesting assets that are less strategic and focusing our investments on our advantaged projects that are among the best in the industry,” Neil Chapman, senior vice president of Exxon Mobil, said in a statement noting the company’s development plans currently prioritize Guyana, Brazil and LNG projects as well as its position in the Permian Basin in the U.S.

In a company release on Feb. 24, Exxon Mobil said it agreed to sell the U.K. North Sea assets to NEO Energy, a portfolio company of HitecVision AS, for more than $1 billion. The agreement also includes roughly $300 million in contingent payments based on an increase in commodity prices.

HitecVision, which also bought Exxon Mobil’s Norwegian North Sea position in 2019, revealed last month it had entered exclusive negotiations with Exxon Mobil for the U.K. North Sea assets.

The transaction includes Exxon Mobil’s nonoperated upstream assets in the U.K. central and northern North Sea comprised of ownership interests in 14 producing fields. Exxon Mobil’s share of production from these fields was approximately 38,000 boe/d in 2019, according to the company release.

Analysts with Tudor, Pickering, Holt & Co. (TPH) view Exxon Mobil’s latest asset sale as largely neutral for shares with proceeds largely in line with the previously disclosed nature of the transaction. Nonetheless, the deal will help Exxon Mobil accelerate balance sheet repair, according to the analysts.

“Assuming a 3Q 2021 close, we estimate the sale accelerates the company’s deleveraging efforts to ~24% net debt-to-book cap by year-end 2021 on our ~$60/bbl Brent price deck vs. ~25% previously, with net debt-to-EBITDA seen comfortably <1.5x albeit slightly above peers on our estimates [of peer average ~1x],” the TPH analysts wrote in a Feb. 24 research note.

“We’ve seen little risk to the dividend for some time as the macro backdrop has improved, with further acceleration of leverage improvement potentially setting up for a return to modest growth in returns to shareholders in 2022,” the analysts added.

Exxon Mobil, which has operated in the U.K. for more than 135 years, will retain its nonoperated share in upstream assets in the southern North Sea. The company is also holding onto its share in the Shell Esso gas and liquids (SEGAL) infrastructure that supplies ethane to Exxon Mobil’s Fife ethylene plant.

The transaction is expected to close by the middle of 2021, subject to regulatory and third-party approvals, the Exxon Mobil release said.