Amerisur makes a move

 

On 26 January 2016, Amerisur announced the acquisition of Platino Energy (Barbados) Ltd, a subsidiary of COG Energy, a private E&P with a focus on Colombia. The consideration for the transaction is USD7 million which we be paid entirely in Amerisur stock, through the issuance of 22.7 million new shares. A further payment of USD500,000 in cash will also be made in respect of fixed assets. As part of the deal, COG is entitled to a 2% overriding royalty if production in the acquired blocks exceeds 5,000bopd.

The transaction adds prospective acreage (190mmbbls unrisked resources) to Amerisur’s Putumayo Basin portfolio at a limited cost with drill ready prospects close to the company’s Platanillo field. Commitments are limited to USD12 million across the next three years. New production from the blocks would have access to Amerisur’s new pipeline to Ecuador, once completed.

The acquired assets include:

• PUT-8 (Amerisur 50%) immediately west of Platanillo with 45mmbbl in unrisked resources in similar structure
• Coati Block (Amerisur 100%) holds 79mmbbl unrisked resources and the Temblon field with long-term testing potential; the next exploration well is partly carried by Canacol (part of farm-in deal for 20%, excluding Temblon)
• Andaquies Block (Amerisur 100%)

The blocks have no or limited X-factors and are covered by 2D and 3D seismic. Drilling commitments include one exploration well on PUT-8 and the Andaquies Block by May 2017 (although some environmental licenses are still to be secured).

On the export pipeline, Amerisur continues to engage with the Ecuadorean authorities to secure the final EIA approval and complete construction of their strategic pipeline connection through Ecuador. This will reduce transportation costs and increase off take capacity.

Amerisur's acquired and existing acreage
Source: Broker research

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Gran Tierra strikes again

On 15th January, Gran Tierra announced the acquisition of PetroGranada’s interest in the highly prospective Putumayo-7 Block, southern Colombia. The acquisition increases the company’s interest in the block to 100% and adds two more drill ready prospects to the inventory of lower risk prospects established through the recently closed Petroamerica acquisition.

Gran Tierra will acquire all of the issued and outstanding shares of PetroGranada (which holds 50% in Putumayo-7) for USD19 million. In addition Gran Tierra  will pay a further USD4 million if the cumulative production from the block meet or exceed 8 MMbbls. The acquisition will be funded from the company’s existing cash resources; the USD200 million debt facility will remain undrawn.

The acquisition adds 1.9mmbbls 2P reserves  and further 50% working interest in the Putumayo-7 Block (GTE now has 100%). The block holds two drill ready prospects (Cumplidor is effectively an extension of the existing Quinde West discovery on the neighbouring Surotiente block). The company expects to drill the wells later this year. Wells in the region are low cost, at less than USD10 million each and the prospects lie close to existing infrastructure, enabling for fast monetisation.

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Statoil acquires stake in Lundin Petroleum

On 14th January, Statoil announced that it had acquired 37.1 million shares in Lundin Petroleum, corresponding to 11.9% of the company. Statoil says that it paid c.SEK4.6 billion for the shares, which equates to a price of SEK120/share or a 28% premium to the share price close as of yesterday at SEK97. Statoil purchased the shares over the past few weeks and says it is supportive of Lundin management, its board of directors and strategy, but there is currently no plan to increase its shareholding in the company.

Statoil says "this is a long term shareholding. The Norwegian Continental Shelf is the backbone of Statoil's business, and this transaction indirectly strengthens our total share of the value creation from core, high value assets on the NCS". Despite the longer term strategic rationale, the move is unexpected. Lundin is one of the more expensive E&P stocks and the transaction further increases Statoil’s exposure to the giant Johan Sverdrup development. Questions are now being asked by the market on whether Statoil can continue to pay its dividend.

From an E&P sector perspective, the move is encouraging as it demonstrates industry interest in the subsector, and the news should help shore-up Lundin’s share price. Nevertheless, corporate activity is likely to remain muted until the oil price starts to recover and confidence returns to the sector.

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PTTEP may pre-empt BG Bongkot process

On 12th January, it was reported that PTTEP, Thailand’s state owned oil company, is keen to acquire BG’s stake in Bongkot. The Bongkot area is located in the Malay Basin in the Gulf of Thailand and consists of various gas accumulations. It is currently owned by PTTEP (44.45% operator), Total (33.33%) and BG (22.22%). PTTEP’s potential desire to acquire this asset is in line with the strategy of Asian NOCs’ of security of supply. For BG, the disposal represents an exit of a non-core asset which supplies gas only to a domestic market and a tidy-up of the portfolio ahead of its merger with Shell.

Southeast Asia M&A environment
The Southeast Asian M&A market has historically accounted for a small portion of global M&A activity (c.7% by deal value and volume between 2009 – 2014); this is largely due to the relative sporadicity of assets that come to market. High quality assets that become available generally garner strong interest from regional players seeking to consolidate around existing positions and competencies in a part of the world which has experienced strong energy demand growth over the last decade (c.3.5% p.a. since 2000 according to the IEA).

The region is dominated by majors, select large-cap E&Ps and regional NOCs and independents. A number of North American players have recently made divestments in the region as part of wider international retrenchment plans (e.g. Hess, ConocoPhillips) – asset sales have generally been met with strong interest. Recent international new entrants include Ophir Energy (acquired Salamander Energy, RBC acted as a joint financial advisor to Ophir) and CEPSA (acquired Coastal Energy).

In the current oil price environment, gas assets with long term gas sales agreements are viewed as particularly attractive, although may not fit the strategy of players (particularly NOCs) seeking oil-weighted production exposure and more flexible supply or off-take. Although oil-weighted assets are a clearly stated preference, assets with strong production cash flows, such as BG Bongkot are also of interest irrespective of the oil/gas weighting.

Thailand is seen as an attractive area for upstream investment, despite the high level of government take. The country is a net importer of hydrocarbons with the domestic supply shortfall expected to increase as a result of continued economic growth. Economic growth supported by government spending on large infrastructure projects and improvement in political stability, whilst gas demand growth driven by switch to gas-fired power plants. The basins are established and proven with further exploration potential and licensing rounds are held regularly.

BG Bongkot sale process
Feedback from various industry players on the BG Bongkot sale process indicates that there is select interest. It is understood that the Chinese NOCs have entered the process, however the opportunity has only attracted weak interest internally; their ability to be competitive in a time critical auction situation is also questionable given increased internal procedures now required following corruption probes. Other regional players, including local NOCs, see limited strategic rationale in acquiring a domestic supply asset and some have limited financial capacity; Indonesian focused players see more compelling opportunities in their home market which are currently live or upcoming (e.g. ConocoPhillips’ interest in South Natuna Sea Block B).

PTTEP’s pre-emption has already been flagged as a key concern by a number of potentially interested parties which is likely to have discouraged some companies from participating in the process. PTTEP’s pre-emption is a key risk given its active strategy to secure supply in the region (as demonstrated by recent acquisitions of Hess’ assets in Thailand and Indonesia) and its strong balance sheet position. PTTEP pursue an active M&A strategy with 10 acquisitions made globally since 2010 and with a total disclosed deal value of ~$6bn. The state company generally acquires acreage in Thailand through licence awards, but will consider M&A for strategic assets that come to market; in 2014, PTTEP acquired Hess’ 35% in Sinphahorm and 15% in Pailin gas fields in which PTTEP was an existing partner in both.

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Kurdistan producers receive fourth consecutive payment from the KRG

Tawke processing facilities
Source: KRG

On 6^th January, DNO and Genel announced that partners of the DNO-operated Tawke field have received a gross payment of USD30 million from the Kurdistan Regional Government for oil exported through the Kurdistan Region of Iraq-Turkey pipeline. This represents the fourth export payment by the KRG since payments recommenced in September.

On 5^th January, Genel also confirmed that the Taq Taq field partners had received a gross payment of USD30 million from the KRG for oil exported through the Kurdistan Region of Iraq-Turkey pipeline with Genel’s share of the payment being USD16.5 million.

It is interesting to note that payments to the oil companies have remained flat (at USD75 million per month) during the past four months, despite a collapse in the oil price from c.USD50/bbl at the start of September to c.USD36/bbl at the end of December 2015. This means that the international oil companies' share of Kurdistan's oil revenues is slowly creeping up.

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