Long awaited deal finally announced: NEO acquires ExxonMobil UK

NEO Energy and HitecVision have announced the signing of a transaction that puts NEO Energy among the top five oil and gas companies in the UK.

NEO Energy is acquiring a major portfolio of non-operated oil and gas assets in the Central and Northern North Sea from ExxonMobil. Following completion, NEO’s expected proforma 2021 production will be circa 70,000 barrels of oil equivalent per day (boepd), growing organically to more than 80,000 boepd in 2024 through ongoing field developments. NEO is acquiring a substantial, cash generative portfolio that will significantly increase and diversify its producing asset base. Adding close to 40,000 boepd and more than 140 million boe of reserves, it represents a major step towards NEO’s near-term target of producing 120,000 boepd.

The acquisition is an important milestone for NEO, supporting the company’s strategy of being a leading full-cycle E&P company on the UKCS. On completion of the transaction, NEO will have a strong presence in the key hubs in the Central and Northern North Sea, with total reserves and resources of around 300 million boe. The company will have a total of 35 fields both producing and under development.

The agreement is valued at more than USD 1 billion. There may be additional contingent considerations of approx. USD 300 million based on the potential for increases in commodity prices.

The assets include several organic growth opportunities, including ongoing development projects such as the Penguins field, infill wells and life extension opportunities. The total number of employees in NEO at closure of the transaction will be circa 160.

The fields being acquired are operated by some of the largest and most experienced offshore operators in the world including Shell, BP and Total. NEO will become Shell’s largest partner in the UK Central and Northern North Sea.

Russ Alton, CEO of NEO Energy, said:

'This acquisition builds on NEO’s existing North Sea portfolio and towards delivering on our ambition to be a leading producer on the UKCS. NEO is well placed, together with its operating partners, to extract value from this and other opportunities, while at the same time focusing on improved environmental performance.'

John Knight, Senior Partner at HitecVision, added:

'HitecVision is a leading investor in the European offshore energy industry with USD 6.7 billion in assets under management. We have built one of Norway’s largest oil and gas companies, through our joint venture with ENI, in Vår Energi. We believe that NEO has the potential to achieve a similar position in the UK sector to that held by Vår Energi in Norway. We will continue to fund NEO’s growth in the UK through more acquisitions and, where appropriate, mergers. This will be the first UK investment for our most recent fund, The  North Opportunity Fund, which we closed in March 2020.'

The transaction, which is subject to approvals from the relevant authorities and regulatory consents, is expected to complete by the middle of 2021.

The portfolio to be acquired consists of 21 assets, including 14 fields and a number of infrastructure positions. The fields can be divided into the following hubs:

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ExxonMobil scores big this week

ExxonMobil has made two significant announcements this week: the sanction of the USD10+ billion Golden Pass LNG project and further exploration success in Guyana.

Golden Pass LNG
On Tuesday, ExxonMobil and Qatar Petroleum sanctioned the Golden Pass LNG project in Texas. It will have a cost of USD10+ billion and deliver capacity of 16mtpa from 2024. Golden Pass was originally a LNG import facility but will be converted over the next five years.

The JV between ExxonMobil and Qatar Petroleum cements the relationship between the two companies and builds upon the existing co-operation in the Qatargas LNG projects in Qatar. The sanctioning of this projects follows Qatar’s decision to pull out of OPEC from January 2019 as it said it would focus its efforts on gas. This may also have been necessary as US is considering cartel legislation which would have impacted Qatar’s ability to participate in US projects.

Guyana success
ExxonMobil announced on Wednesday the successful 11th and 12th discoveries offshore Guyana. This follows the 10th discovery, Pluma-1, made in December 2018.

Tilapia-1 encountered 93m of high quality reservoir  (oil) and lies in the Turbot Area of the Stabroek Block, which also contains the Turbot, Longtail and Pluma discoveries. The next well in plan is the Yellowtail-1 located 10km to the west.

Haimara-1 encountered 63m of high quality reservoir (gas/condensate) and could potentially open up a new area.

These discoveries will add to the recently resource estimate of 5+bnboe (from already increased from 4+bnboe following Pluma-1). With a further 15+ prospects to drill, the resource estimate could increase materially.

Phase 1 (Liza Phase 1) of the development is underway, and will include 17 wells connected to a FPSO with 120mbopd production expected in early-2020. Liza Phase 2 is planned to be sanctioned soon with a 220mbopd FPSO. Phase 3 (Payara) sanction is also expected in 2019 with startup in 2023. ExxonMobil sees at least five FPSOs on the Stabroek Block with production of >750mbopd by 2025.

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ExxonMobil makes 10th oil discovery offshore Guyana; resource increased to 5+ bnboe

ExxonMobil announced its tenth discovery offshore Guyana and its sixth discovery on the Stabroek Block in the past year.

The Pluma-1 well encountered c.121 feet of high-quality, oil-bearing sandstone reservoir and is located c.17 miles southwest of the Turbot-1 well and follows previous discoveries on the Stabroek Block at Liza, Liza Deep, Payara, Snoek, Turbot, Ranger, Pacora, Longtail and Hammerhead. The discovery adds to ExxonMobil's previous 4+ bnboe resource estimate which is now being increased to 5+ bnboe.

The drillship will next drill the Tilapia-1 prospect located 3.4 miles (5.5 kilometers) west of the Longtail-1 well, with ongoing work to evaluate development options in the southeastern portion of the block and potentially combining Pluma with the prior Turbot and Longtail discoveries.

Phase 1 of the development is underway, and will include 17 wells connected to a FPSO with 120mbopd capacity by early-2020.

Phase 2 is due to be sanctioned in early-2019 and will use a 220mbopd FPSO.

For Phase 3, ExxonMobil plans to use an 180mbopd FPSO, with first oil in 2023. FID for Phase 3 is expected in 2019, which is now further supported by the Pluma discovery.

ExxonMobil sees the potential for five FPSOs producing 750mbopd by 2025 offshore Guyana.

#ExxonMobil #Guyana #Pluma #Liza #Stabroek

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Papua New Guinea LNG force majeure a week after expansion plans announced

ExxonMobil has declared force majeure on PNG LNG after Papua New Guinea was hit by a 7.5 magnitude earthquake on Monday. The partners in the plant, which exported 7.8 million tonnes last year, are ExxonMobil (33.2% operator), Oil Search (29%), State of Papua New Guinea (16.8%), Santos (13.5%), JX Nippon (4.7%) and Mineral Resources Development Company of Papua New Guinea (2.8%). Latest reports are that the pipeline and liquefaction plant sustained minimal damage, but could potentially be another six weeks before it can be restarted.

This comes a week after the announcement by the upstream partners in Papua New Guinea’s giant gas resources to more than double the country’s liquefaction capacity to 16mmtpa at a cost of USD13 billion. The partners are planning to help add a further three trains in the country – one to support growth at ExxonMobil’s P’nyang field, and two to service new gas from Total’s Elk-Antelope development. FEED is planned to start later this year, but will require agreement of terms with the PNG government first including domestic supply obligations.

Given this is a brownfield expansion, it is significantly cheaper than the original USD19.5 billion construction cost of the project. The partners were previously toying with the idea of having a separate facility for Elk-Antelope gas as Total and ExxonMobil could not reach agreement. ExxonMobil was pushing for the gas to go through PNG LNG supported by train expansions, while Total was considering a new plant (Papua LNG). While the details on the new three trains remain high level and could still see a separate Papua LNG project, this agreement thaws the development discussions which have been frozen for more than a year. The separate trains supporting the different upstream gas sources will also be conducive to structuring and financing of the proposed project – avoiding the complexity involved with unitisations and co-mingled gas marketing. The new LNG could come onstream by the early 2020s and would arrive in time for an emerging LNG supply gap that is foreseen by the industry.

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Norway awards record 75 exploration licences in 2017 APA

Norway has awarded a record number of 75 exploration licences in the APA 2017 licensing round to 34 companies. The licences comprised 45 in the Norwegian North Sea, 22 in the Norwegian Sea and 8 in the Barents Sea.

Statoil was the biggest winnder with 31 awards. Supermajors ConocoPhillips, ExxonMobil, Shell and Total also picked up licences.

Of the E&Ps:

• Aker BP was the winner with 23 licences (14 as operator)
• Lundin has been awarded 14 licences (5 as operator)
• DNO has been awarded in 10 licences
• Faroe Petroleum has been awarded 8 licences (four as operator)
• Cairn Energy has been awarded 5 licences

The Annual Predefined Areas or APA round was introduced in 2003 to encourage exploration and development of discoveries near existing infrastructure. Across all the awards this time, there are three licences with firm drilling commitments, with the remaining having drill or drop options in the next 12-24 months.

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Point Resources acquires ExxonMobil's Norwegian operated assets

On 29^th March 2017, Point Resources announced its acquisition of ExxonMobil's operated upstream business in Norway for an undisclosed amount (estimated valuation of c.USD1bn). The deal transforms Point Resources into a top 10 producer on the Norwegian Continental shelf and increases production c.10-fold to 48mboepd while adding 128mmboe of oil-weighted reserves. The transaction adds significant technical capability with the transfer of 300 staff to Point Resources.

Point Resources was formed in 2016 by the merger of Core Energy, Spike Exploration and Pure Energy, all portfolio companies of Norwegian E&P private equity specialist HitecVision. The merger created a company with a portfolio weighted towards exploration and development positions (e.g. Brage, Brasse, Pil) and the acquisition of the ExxonMobil assets helps to reweight the portfolio into more of a full cycle one.

The key assets acquired were ExxonMobil’s operated positions: Balder, Ringhorne and Jotun; Forseti is being decommissioned. Point Resources has identified significant upside in the asset base that can be achieved through infill drilling – likely to have been overlooked by ExxonMobil with the portfolio being increasingly immaterial within ExxonMobil’s global business. For ExxonMobil, the divestment leaves it with a non-operated portfolio in Norway and therefore a much lower country cost base, but still provides a platform to access high impact Norwegian and Barents Sea exploration.

Source: Wood Mackenzie
4D seismic has identified new development locations and exploration targets around Balder and Ringhorne

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ExxonMobil - finding a needle in a haystack

We met with ExxonMobil in the first week of December to catch up on what they have been up in 2015 on the M&A front. The low oil price has certainly prompted an internal flurry of screening for targets and the teams have been looking at “a lot of opportunities” with billions of dollars ready to be spent on acquisitions. Despite a desire to do something, finding the right opportunity is still like “finding a needle in a haystack”.

ExxonMobil’s corporate development team is split into two divisions – Upstream Ventures which look at deals up to USD20 billion and Corporate Strategic Planning which look at deals above USD20 billion. Acquisitions broadly fall into three categories which are generally independent of size:

• Bolt-ons – these are generally small acquisitions to supplement an existing position although larger acquisitions will be considered on a case-by-case basis 
• Expansions – these are to materially grow an existing position into a wider position; size is opportunity specific and considered on a case-by-case basis
• New entry – these are always sizeable acquisitions as they must have sufficient critical mass in order to establish a new position

Outside of North America, Africa and the Middle East are regions of keen interest and we discussed two themes around current market developments.

The Africa Oil farm-out to Maersk was viewed as interesting and ExxonMobil remarked that more innovative structures, such as the one adopted by Maersk, was likely needed to get deals which weren’t clear winners over the line in the current oil price environment. East Africa is an area which ExxonMobil’s technical team have evaluated before and they remain cautious on the prospectivity (noting that no-one outside of Tullow/Africa Oil has been successful in the region) and timing to first oil (given the export pipeline infrastructure is yet to be built).

On Kurdistan, ExxonMobil are comfortable with the region geologically but see very few opportunities of sufficient size to justify building up a full-scale presence. This likely limits the opportunities to a handful such as Genel and Gulf Keystone. Payments for exports by the Kurdistan Regional Government remain a key issue and ExxonMobil noted that any slippage of payments could severely depress project economics as well as delaying any development spending. The Kurdistan Regional Government have implemented payment schedule on multiple occasions in the past which subsequently collapsed and it yet remains to be seen whether the current payment plan, implemented in September 2015, can be sustained.

ExxonMobil will continue to scour the international E&P landscape for opportunities and believe that current environment is a good time to act, but finding the perfect opportunity remains a challenge.

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