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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Gina Krog nears first oil

The NPD has today granted Statoil, the operator, to commence production at Gina Krog in June. The field was originally a gas discovery made in 1974 and had been considered for development on a number of occasions throughout history. In 2007, oil (and gas) was discovered in a nearby prospect and Gina Krog was subsequently reviewed again with a full appraisal and delineation programme taking place between 2008-2011 which confirmed substantial amounts of oil under the entire structure.

A Plan for Development and Operation was submitted in December 2012, with approval obtained in March 2013. The field will be developed using a fixed steel platform and FSO, with oil exported via shuttle tankers. The development is planned to utilise 10 production wells and 4 gas combined injection/production wells. The field is estimated to contain 225mmboe. Most of the gas will initially be re-injected for reservoir support with minimal sales gas during this first phase. This will be followed by a gas blow-down phase, expected to commence in the mid-2020s which will see gas exported to the Sleipner facilities for processing and onward sale.

The partners in the field are:

• Statoil 58.7%, operator
• KUFPEC 15%
• Total 15%
• PGNiG 8%
• Aker BP 3.3%

Total has been offloading its stake in Gina Krog since 2014 in an attempt to reduce exposure to relatively high cost fields and development capex.

• In 2014, it sold a 8% interest to PGNiG along with a package of other Norwegian assets
• In 2015, Total had agreed to sell a 15% interest to Sequa Petroleum – the latter pulled out of the deal in April 2016 citing market conditions
• In January 2016, KUFPEC acquired a 15% interest as part of a wider package of Norwegian assets from Total
• Total current retains a 15% stake and it is rumoured that this will be sold to OKEA for USD350 million

Total is aiming to move down the cost curve by divesting higher cost assets globally. Its near-term capex is 20% weighted to Norway post Gina Krog start-up, so any sale proceeds will be a welcome contribution to ongoing spend, including the Total operated Martin Linge development which is scheduled to produce first oil in early 2018.

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Kraken on track for first oil in June

EnQuest has reported that Kraken remains on track for first oil before the end of June 2017. Drilling is now complete at the first two drilling centres (DC1 and DC2), the rig is currently at DC3. Drilling performance to date has de-risked delivery of the project to and beyond first oil.  At start up, 7 producers and 6 injectors will be in place. Handover of FPSO systems from commissioning to operations continues and the wells will be brought onstream in a phased manner in June. EnQuest emphasises that the project continues to be under budget and on schedule.

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INEOS acquires DONG E&P portfolio

On 24^th May, INEOS announced the acquisition of DONG's E&P business for USD1.05bn with two further contingent payments:

• USD150 million relating to the Frederica stabilisation plant; and
• USD100 million subject to the development of Rosebank

As part of the transaction, DONG will retain all hedges that are currently in place (worth USD285 million) and cashflows from the oil & gas business (worth c.USD310 million). Ineos will adopt all decommissioning liabilities (c.USD1.1 billion).

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.

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Private equity backed Neptune Energy acquires Engie E&P

On 11^th 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

Neptune was established in 2015 by The Carlyle Group and CVC Capital Partners, targeting large oil & gas opportunities becoming available during the oil price downturn It is headed by industry veteran and former Centrica CEO Sam Laidlaw. Neptune intends to grow the portfolio organically and through bolt-on acquisitions, with ambitions to create a “large, independent E&P company” over the next five years.

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Yakaar - major gas discovery offshore Senegal

 Kosmos has made a substantial 15tcf gas discovery offshore Senegal. The Yakaar-1 well on the Cayar Offshore Profond licence intersected a gross hydrocarbon column of 120m and encountered 45m of net pay. The well confirmed the presence of thick, stacked, reservoir sands over a large area with very good porosity and permeability.

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

Kosmos has revised its exploration schedule since February 2017, introducing Hippocampe to the mix which has been prioritised ahead of Lamantin and Requin Tigre. Hippocampe is potentially a more valuable, liquid prone prospect and would likely be easier to commercialise in the case of success than the deepwater gas resources to date.

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)

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DNO: Branching out

 

In a move as surprising as TransGlobe's entry into Canada, DNO has announced the acquisition or Origo Exploration, a UK and Norway focussed private explorer backed by GNRI, Riverstone and Temasek. As consideration, DNO will assume Origo's exploration commitments and licence obligations.

Origo has interests in 11 blocks offshore UK and Norway, with 20-30% non-operated interest in each block. This portfolio is expected to generate around three exploration drilling opportunties per year. The management team and staff will be reataiend as part of the acquisition as will its office in Stavanger.

DNO could use this platform to establish a North Sea base (organically and through acquisitions), and although the strategic logic of this acquisition is currently unclear, it presents a new region for DNO to replicate its past exploration and operational success. It also signals the fact that DNO may see limited attractive opportunities in Kurdistan to reinvest its growing cash base on a risk-reward basis.

Origo Portfolio
Source: Company information, NPD

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