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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Thursday, 25 May 2017
Kraken on track for first oil in June
Wednesday, 24 May 2017
INEOS acquires DONG E&P portfolio
- USD150 million relating to the Frederica stabilisation plant; and
- USD100 million subject to the development of Rosebank
The deal includes a portfolio of long life assets with 100mboepd production and 570mmboe of commercial reserves and contingent resources. The portfolio's corner stone assets are Ormen Lange (Norwegian gas) and Laggan-Tormore (new gas field in West of Shetlands).
All 440 DONG personnel will transfer to INEOS on completion, which is expected towards the end of 2017. The deal with propel INEOS into the top 10 league of North Sea players and enable the company to significantly expand its trading and shipping activities.
Friday, 12 May 2017
Private equity backed Neptune Energy acquires Engie E&P
On 11th May, Neptune Energy announced that it had agreed to acquire Engie's upstream portfolio, Engie E&P International ("EPI"). In 2011, Engie had sold 30% of EPI to China Investment Corporation ("CIC"), retaining a 70% interest in the business. As part of the transaction, Neptune Energy will pay USD3.9 billion for the 70% stake and also take over CIC's 30% stake, in return for CIC becoming a 49% shareholder in Neptune Energy. The Carlyle Group and CVC Capital Partners will together hold 51% in Neptune Energy.
The USD3.9 billion headline transaction value includes c.USD95 million of contingent payments linked to certain operational milestones. EPI will also retain the decommissioning liabilities associated with the portfolio (i.e. transferred to Neptune Energy), allowing Engie to deconsolidate c.USD1.2 billion of decommissioning liabilities from its balance sheet. The deal implies a transaction multiple of EV/2P of USD6.3/boe (based on transaction value of USD3.9 billion).
The EPI portfolio is focussed on North West Europe with additional operations in North Africa and South East Asia and includes a mix of exploration, development and production assets. However, Engie has agreed to retain the Algerian gas development as part of the deal. The portfolio will be gas weighted and is underpinned by a number of key long-term assets including Snøhvit and Njord in Norway, Cygnus in the UK, Römerberg in Germany and Jangkrik in Indonesia.
The acquisition will propel Neptune Energy into one of the largest international E&Ps with the deal expected to close at the beginning of 2018.
International E&P reserve rankings Source: Company disclosure, OGInsights |
International E&P 2016 production rankings Source: Company disclosure, OGInsights |
Wednesday, 10 May 2017
Yakaar - major gas discovery offshore Senegal
This discovery marks the continuation of Kosmos’ success in the Mauritania/Senegal river basin (Tortue, Ahmeyin, Marsouin and Teranga). Yakaar and Teranga together hold 20tcf (Pmean gas resource) and creates the opportunity for a second LNG hub in Senegal (in addition to the planned Greater Tortue Area).
Source: Kosmos Energy May 2017 company presentation |
The drilling schedule over the next 12 months is now:
- Tortue-DST (imminent)
- Hippocampe-1 (Q3/4 2017)
- Lamantin-1 (Q4 2017)
- Requin Tigre-1 (Q4 2017/Q1 2018)
Thursday, 4 May 2017
DNO: Branching out
Origo Portfolio Source: Company information, NPD |
Wednesday, 3 May 2017
Major interest in Senegal
- Acquisition of the RPO block (Total 90%, Petrosen 10%) which lies in deepwater immediately adjacent to the SNE and FAN discoveries (Cairn 40%, Woodside 35%, FAR 15%, Petrosen 10%)
- Agreement to perform studies to assess the exploration potential of Senegal’s ultra-deep offshore and become operator of an exploration block.
This activity follows the recent transaction by BP into Kosmos’ exploration and appraisal acreage in Mauritania and Senegal, and CNOOC Nexen’s strategic partnership with FAR in Senegal and The Gambia. In the latter, the partnership covers an initial two year period, providing for co-operation and potential joint bidding on farm-ins, acquisitions and open acreage. FAR and CNOOC Nexen will also share technical expertise and relationships.
While the tangible benefits of this relationship cannot currently be quantified, CNOOC Nexen will be a useful partner to have as SNE progresses towards FEED and may eventually acquire or help fund FAR post FID. CNOOC Nexen could also have an interest in FAR’s Gambian blocks that lie to the south of SNE.
CNOOC is an established player in Africa with development/production in Uganda and Nigeria and exploration interests in Equatorial Guinea, Gabon and the Republic of Congo.
Friday, 28 April 2017
Saudi Arabia: Consolidating power and austerity tested
King Salman’s sons, Abdulaziz bin Salman and Khaled bin Salman, will become Minister of State for Energy and Saudi Ambassador to the US respectively.
- Prince Abdulaziz has held a variety of senior positions in the oil ministry through the years and was a proponent of abandoning the market share strategy
- Prince Khaled has served as an advisor to the Saudi embassy in Washington – his placement will be to help strengthen ties between the US and Saudi, consistent with the messages since the Trump and Deputy Crown Prince meeting in March 2017
Prince Abdulaziz and Prince Khaled are half-brothers; Prince Khaled is a younger brother to the Deputy Crown Prince, Mohammed bin Salman.
The other key decision this week was the reversal of civil service salary and benefits cuts. The austerity measures have caused discontent with the public, of which c.70% work for the civil service, leading to cries demanding the reversal of salary cuts, reinstatement of benefits, scrapping the planned IPO of Saudi Aramco and a change of the ruling system from an absolute to a constitutional monarchy – the latter being a key concern and threat to the Salmans’ power. The reversal of the cuts were well received and although undermines the economic outlook of Saudi Arabia, is clearly much more desirable than public revolt.
The temporary austerity measures reduced the spending deficit from USD97 billion in 2015 to USD79 billion in 2016. The target for 2017 was set at an ambitious USD53 billion, but this now looks unachievable with the announced reversals. The reversals place the Deputy Crown Prince in an awkward position within the family’s diverging aspirations for the Kingdom with the potential undermining of his Vision 2030 which aimed to scale back the public sector wage bill and civil service, with diversification of the economy. The durability and longevity of other Saudi measures and now being put to the test.