Premier's Christmas present

Premier Oil announced today that the Catcher field achieved first oil on 23^rd December, on schedule and almost 30% below budget. Initial production will be c.10mbopd as gas processing and water injection modules are commissioned. Production will be ramped up in phases through H1 2018 as the Varadero and Burgman fields are brought onstream increasing production to 60,000mboepd (gross).

The Catcher partners are Premier Oil (50% operator), Cairn Energy (20%), MOL (20%) and Dyas (10%). For Premier Oil, Catcher will account for c.25% of 2018 production with successful ramp up of the field important to deleveraging the balance sheet next year. For Cairn, this will diversify the production base following first oil at Kraken (29.5% interest) earlier this year.

Read More

Kosmos: An unfinished West African story

Kosmos has had a busy 2017 chasing a high risk high reward oil play and working up its Senegal/Mauritania gas resources.

In the second half of the year Hippocampe and Lamantin both came in dry ending the company's campaign for higher value oil. It can now focus on developing the c.40tcf of gas found at Tortue, Teranga, Yakaar and BirAllah. It has hopefully found the right partner in BP who farmed-in in late 2016. Although not generally seen as a big gas player, BP is increasingly focussed on gas as it turns to the future - the major is shifting to investing in large scale gas projects and look to increase global production to c.60% gas from the current c.50%.

When we met with Kosmos earlier this year, they noted that they had their choice of Supermajor when seeking a partner with attractive offers from the usual suspects. Kosmos see BP as the partner who is fully aligned with them, with BP going as far as setting up Senegal/Mauritania a separate profit centre to demonstrate their seriousness.

The West African gas play continues to be derisked with the 60tcf Requin Tigre prospect being drilled and results expected in early 2018 which would increase gas resources in the basin to c.100tcf if successful. This could add a significant leg to a multi-phase LNG project. However, a dry well would dampen the high mood in the basin with the growth outlook more constrained.

FID around Tortue is planned in 2018, although success at Requin Tigre could change the development order with Tortue (which straddles the Senegal/Mauritania border) delayed. It should also be noted that gas would come onstream at a time of a gas glut with LNG in North America, East Africa and Australia coming onstream.

Read More

AWE: an unexpected union

The AWE Board has unanimously recommended a revised bid by Mineral Resources (“MinRes”). The offer terms are A$0.415 in cash and between 0.0198 and 0.0277 MinRes shares per AWE share. The exchange ratio will depend on the VWAP for the 10 days prior to the scheme vote. The previous offer was a full scrip offer at A$0.81.

This values the offer at an implied price of c.A$0.83 per AWE share and will be implemented by a Scheme of Arrangement, which will require 75% shareholder approval with the shareholder meeting to be held in mid-April 2018. Shareholders will have the option to receive 100% cash or 100% scrip subject to scale back to ensure total transaction consideration is 50% cash and 50% scrip.

After four years of “tug-of-war” between AWE and various bidders (Senex in 2013, Lone Star in 2016, CERCG in 2017 and various others which have not been made public), it looks like the AWE Board have finally selected a suitor. Although AWE could have gone down the “do it alone” route, the uncertainty on timing of new production from Waitsia and/or Ande Ande Lumut cast a shadow over the company’s story and its future with a declining production profile.

MinRes immediately answers the question of future gas offtake: Min Res has a requirement for c.30TJ/d of gas based on current plans to convert all of its internal power generation to gas fired plant and to use as the primary fuel source for its Lithium/Graphite related downstream processing plants. This gas requirement is expected to grow with the likely conversion of 26 mine sites (growing to 40) to gas as well as potential for more downstream projects. The rationale for MinRes acquiring AWE is so that it can lock in its gas costs for the next 20–30 years. Min Res also plans to provide gas to its mining clients under long-term gas supply contracts.

AWE shareholders will buy into a new story of a miner/mining service provider with its own growth story. The variable cash and scrip components will likely promote higher acceptances and will provide a way for AWE shareholders to fully realize their investment if they choose not to go into MinRes.

MinRes offer is c.14% above the previous all cash A$0.73 bid from CERCG – MinRes would have the right of response to match any competing offer if CERCG or another party came back with a superior proposal. The deal is subject to a break fee of A$5.2 million.

Read More

Zohr record breaker

In record time for a deepwater gas development of this scale, Eni has announced first production from Zohr. The field was discovered in August 2015 and FID taken in early 2016 - Eni achieved first gas from discovery in 2.5 years.

Zohr is the largest gas discovery ever made offshore Egypt and is located in the Shorouk block. The field has begun production at 350mmcfpd and is expected to grow to 1bcfpd by mid-2018. The speed of development is a testament to Eni's "Dual Exploration Model" which was adopted in 2013. Under this model, Eni works the exploration, appraisal and development planning and phases in parallel while bringing in minority partners at the same time to help fund the costs.

Zohr has >30tcf of GIIP and forms an important piece of the jigsaw to solving Egypt's short gas problem. The new production will help feed the hungry and growing domestic gas demand which Egypt has been trying to manage by raising domestic prices on the one hand and incentivising further gas exploration/development on the other.

The Zohr partners are Eni (60%), Rosneft (30%) and BP (10%). Eni is co-Operator of the project through Petrobel, which is jointly held by Eni and EGPC.

Read More

Kurdistan producers get paid for September

DNO and Genel Energy have reported receipt of USD54 million from the KRG for September crude sales from the Tawke licence - shared by DNO (USD40.7 million) and Genel (USD13.6 million) in line with the interests in the licence.

In addition, a payment of USD10.8 million has been received by Genel and DNO, representing 7.5% of gross Tawke licence revenues during October 2017, as provided for under the receivables settlement agreement.

Separately, the Taq Taq field partners have received a payment of $9.7m from the KRG for September oil sales - Genel's net share of the payment is USD5.3 million.

This is the first set of payments that has been made following Kurdistan’s independence election and the choking back of oil exports from the Kirkuk Area, which has limited the KRG’s cash flows. Although a positive, concerns will continue around the continuity of payments.

Read More

Maersk Drilling exits Egyptian JV in line with strategy

Maersk continues to review and streamline its business portfolio. As part of that strategy, it announced today of its exit of the Egyptian rig company joint venture.

Press release
A.P. Møller - Mærsk A/S ("A.P. Moller - Maersk") and Egyptian General Petroleum Corporation ("EGPC") has today signed an agreement whereby EGPC will acquire A.P. Moller - Maersk’s 50 percent shareholding in Egyptian Drilling Company ("EDC") for USD 100m in an all-cash transaction.

Following the transaction EGPC will become sole owner of EDC and will as part of the agreement take over the entire portfolio, obligations and rights. EDC is one of the leading drilling operators in the Middle East and operates 70 rigs in total of which the vast majority are land based drilling rigs.

The divestment of EDC is in line with Maersk Drilling’s strategy to focus on offshore drilling in the harsh environment and deepwater markets.

“I am very pleased with this agreement with EGPC. The divestment is a natural consequence of our announced long-term plans to exit the EDC joint venture, when the timing was right. EDC has a very strong position in the Middle East, and I am confident that the new ownership will enable EDC to develop its business and capabilities even further,” says Jørn Madsen, CEO of Maersk Drilling.

EDC began operations in 1976 as a 50/50 joint venture between Maersk Drilling and EGPC, which is owned by the Ministry of Petroleum and Mineral Resources in Egypt. EDC employs approximately 5,000 people, whereof 34 are Maersk Drilling employees. Maersk Drilling is currently looking into future job opportunities for its employees in EDC.

Source: https://www.maerskdrilling.com/en/media-center/press-release-archive/2017/12/maersk-exits-egyptian-drilling-company-joint-venture

Read More

CNPC could take over Total's interests in Iran

CNPC is considering taking over Total's stake in a the giant South Pars development if Total needs to exit Iran to comply with any new U.S. sanctions. In October, President Trump refused to certify Iran's compliance with the nuclear deal leading to a Congressional vote on whether to reimpose sanctions on Iran.

The date of the vote has not yet been set , but if sanctions are reimposed they could prohibit companies working in Iran from also operating in the United States. For Total, the stakes are high, where they have much larger operations in the United States.

Total signed the USD1 billion deal to develop the South Pars gas field in July. However, the contract provided mechanisms to allow Total to pull out in the case of sanctions imposition, whereby CNPC has the option to take over Total's stake. CNPC could take over Total's 50.1% interest and become operator of the project if Total is forced to withdraw from Iran. CNPC has a 30% stake, while the Iranian national oil company's subsidiary PetroPars holds the remaining 19.9%. If this goes ahead, then CNPC would shoulder 80.5% of the cost of the project, estimated at $2 billion for the first stage.

Any change would also delay the project as Total is already in discussion with service companies and is expected to award contracts early next year.

The South Pars project will have a production capacity of 2bcf/d plus condensates, Total has said. It would start supplying the Iranian domestic market starting in 2021.

Read More