Saudi Arabia - joining the dots

A series of blog entries exploring Saudi Arabia's role in the oil markets with a brief look at the history of the royal family and politics that dictate and influence the Kingdom's oil policy

AIM - Assets In Market

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Iran negotiations - is the end nigh?

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Yemen: The Islamic Chessboard?

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Acquisition Criteria

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Valuation Series

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Tuesday, 25 April 2017

More innovative investment from Schlumberger for Sound Energy

Sound and Schlumberger have agreed to extend their partnership under the existing Field Management Agreement. In an era where more innovative financing arrangements are being seen, Schlumberger will be granted 27.5% interest in the Meridja and Tendrara Relinquished Areas in exchange for providing services.

Schlumberger will carry out the upcoming geophysical programme which will include:
  • 2,600km of new 2D seismic covering the Paleozoic across the Tendrara and Meridja areas; and
  • 24,000km2 of gravity gradiometry
The programme has an estimated value of USD27.2 million and will be completed over the next 12 months in stages, with an updated prospect inventory produced at each stage.

Wednesday, 5 April 2017

Premier sells out of Pakistan

Premier has announced the disposal of its Pakistan business for USD65.6 million to Al-Haj General Trading Co. The sale process for these assets was initiated in 2015 after an unsolicited approach and culminates with today's announcement.The Pakistan assets comprise six non-operated producing gas fields which produced c.47mmcfpd and generated c.USD41 million in 2016.

Premier has been present in Pakistan since 1988 and in 1990, made the Qadirpur discovery. Since then, the company has acquired interests in five other fields, all located onshore. The fields are long-life assets with low operating costs. All production is sold to the government-owned gas utilities, SSGCL and SNGPL.

This disposal is in line with Premier's strategy to dispose of non-core assets to reduce net debt. The deal is expected to close at the end of the year and is pending government and regulatory approvals. The effective date of the transaction is 1st January 2017.

Monday, 27 March 2017

Shell sells onshore Gabon to Carlyle

On 24th March, Shell announced the sale of its onshore Gabon assets to Assala Energy Holdings (a portfolio company backed by Carlyle Group).

Assala will pay USD587 million and assume debt of USD285 million, taking “enterprise value” to c.USD870 million. Shell will also receive up to a further USD150 million in contingent payments depending on oil prices and performance. This compares with a Wood Mackenzie NPV10 of c.USD600 million and implies that some value being placed on the gas resources.

The onshore portfolio comprises c.60mmbbl of oil (commercial) and c.160bcf of contingent gas. The gas is currently undeveloped due to a limited market, but could one day be used to supply local power generation. The portfolio produces c.35mbopd of and Shell Trading will retain lifting rights from the assets for the next five years.

The licences being acquired are a mix of PSCs and concessions with some of the concessions being converted into PSCs over the last 10-20 years when they came up for renewal. The licences are owned directly and indirectly through a JV with the Gabonese government (75% Shell, 25% State). The largest asset in the portfolio is Toucan which commenced production in 2003 – significant investment was made between 2012-2014 as part of an additional phase of development to extend the field life to c.2030.

The offshore licences (BC9 and BC10) are excluded from the same, where Shell made the large Leopard-1 discovery in 2014 which is estimated to contain close to 1tcf of recoverable gas.

Tuesday, 7 March 2017

Bowleven Bomono farm-out

Bowleven and Victoria Oil & Gas ("VOG") have signed a farm-out agreement relating to the Bomono production sharing contract. VOG is a domestic Cameroon gas supplier, and gas upcoming production from Bomono fits in with its strategy of expanding local supply.

Bowleven will retain a 20% operated interest in the Bomono PSC and VOG will have an 80% interest. Bowleven will receive £100,000 worth of new ordinary shares in VOG and a 3.5% royalty from VOG’s production share from the licence, with a cap limiting the total royalty payments to USD20 million. VOG will complete the civil engineering (c.USD6 million) and Bowleven has agreed to pay 50% of any deficit, limited to a USD2 million.

Gas produced from the Bomono PSC is expected to be fed into the customer distribution network owned and operated by Gaz du Cameroun, a wholly owned subsidiary of VOG and the gas will be sold to GDC less a tolling fee. First gas supply to the GDC network is anticipated to start following granting of a Provisional Exploitation Authorisation ("PEA") and other approvals.

Bowleven’s detailed prospect inventory indicates there is 146bcf and 263bcf of mean un-risked GIIP in the Tertiary and deeper Cretaceous reservoir intervals respectively. Completion of the deal is subject to the grant of a PEA over the Bomono PSC and approval from the Cameroon Government.

Monday, 6 March 2017

Perenco acquires Gabonese assets from Total

On 27th February Total announced that it had agreed the sale of its Gabonese assets to Perenco for USD350 million. Perenco will acquire:

  • Total Participations Petrolières Gabon ("TPPG") a wholly owned subsidiary of Total which has interests in 10 assets; and
  • 5 assets from Total Gabon, the publicly listed entity in which Total owns 58.3% and the government of Gabon 41.7%

The package will comprise of 12 fields (some are owned by ‎TPPG and Total Gabon) with 13mbopd production as well as the operated Rabi-Coucal-Cap pipeline. Perenco will acquire operatorship of all the assets apart from Rabi which is operated by Shell.

The assets are mature with the majority currently having an expected end of life between 2020 and 2030. However the deal fits with Perenco's successful strategy of creating value from mature assets. Perenco has a track record of exploiting mature assets around the world, including in Colombia, the UK, Congo and Cameroon. Perenco already has assets in Gabon and this acquisition provides an opportunity for operational and cost synergies and cements West Africa as a core region for the company.

Although the assets provide only oil production, there ‎are significant contingent gas resources especially in Rabin with an estimated 250 bcf gas cap. Perenco is currently the sole gas producer in the country, supplying local power plants and the new gas provides significant back up volumes.

For Total, the divestment will contribute towards the 2014 mandated divestment target of USD10 billion to 2017, of which c.USD8 billion has been achieved to date. It should be noted that this does not represent a complete country exit for Total which still retains assets through Total Gabon, such as Grand Anguille and the deep water Diaba exploration block.

Friday, 3 March 2017

Sterling sells out to Oranje-Nassau Energie

Sterling Resources has announced it has entered into an agreement to sell its SRUK Holdings subsidiary to Oranje-Nassau Energie for a net consideration of USD113 million, assuming the bonds are fully redeemed and the super senior revolving credit facility is cancelled. Sterling anticipates a completion date of 15th May.

Following Sterling’s recapitalization in May 2016, the board of continued to review and pursue various M&A opportunities to rebuild the business. Sterling considered a number of opportunities and alternatives, including mergers with a variety of potential counterparties. Ultimately, this process culminated with the board of Sterling recommending the sale of SRUK Holdings to Oranje-Nassau. Once the transaction is approved by shareholders, Sterling will no longer have

any business operations and it currently intends to undertake a voluntary winding-up, with the distribution of all net proceeds of the transaction to shareholders. The shares of Sterling are expected to cease trading and be delisted from the TSX-V following the final distribution.

Thursday, 2 March 2017

More success at Jacana

GeoPark today announced the successful drilling and testing of the Jacana-11 appraisal well on block LLA-34. The well, located 2.5km southwest of Jacana-6 and extends the Tigana/Jacana oilfield to the south-west edge of the block. The well reached TD of 11,618ft and did not encounter the oil-water contact.

Jacana-11 tested at c.2,100b/d (18.7 API, <1% water cut) with an ESP from the Guadalupe formation, and the well is already in production.

The Jacana Sur-2 well is the next well scheduled to be drilled and is targeting a further extension of the field in the northwest direction.