LNG

Italian energy company Eni has reached an agreement on the combination of substantially all of its upstream assets in the UK with Ithaca Energy to significantly strengthen its presence on the Continental Shelf of the UK, a significant LNG importer.

Eni is one of the most dynamic oil and gas exploration and production companies that has brought transformational energy resources through gas discoveries and development of existing fields offshore nation like Mozambique and Egypt and in others in Asia.

Under the terms of the business combination agreement Eni and Ithaca will combine the Eni UK Business with the existing Ithaca business.

The combination is being funded through the issue to Eni UK of a number of new ordinary shares that represents 38.5 percent of the enlarged issued share capital of Ithaca.

The economic effective date for the combination will be 30 June 2024, with completion expected in the third quarter.

Ithaca is one of the largest independent oil and gas companies on the UKCS, with a substantial resource base and playing a key role in energy supply security in the region, with stakes in six of the 10 largest fields and the top two largest development fields on the UKCS.

Stronger group

“The combination will immediately create an enlarged and stronger group with 2024 production greater than 100,000 barrels of oil equivalent per day and the underlying potential to organically grow to 150,000 boepd by the early 2030s,” said Eni.

“The combination is aimed at replicating the previous successful execution of upstream combinations that Eni has formed using its distinctive Satellite Model including Vår Energi in Norway and Azule Energy in Angola,” the Milan-based company explained.

“The Satellite Model is a strategic response to the challenges and opportunities of energy markets, creating focused and lean companies able to attract new capital to create value through operating and financial synergies and the acceleration of growth,” said Eni.

With this approach Eni said it would thereby strengthen its commitment to the UK after its previous acquisition Neptune Energy.

Eni concluded an agreed acquisition for $4.9 billion of UK-based Neptune in June 2023, gaining key global LNG stakes and gas field assets in Algeria, Indonesia, Norway, the UK, the Netherlands and Australia.

Under the terms of the takeover, Eni purchased Neptune for $2.6Bln and Eni’s Norwegian-listed subsidiary Vår Energi agreed to pay $2.3Bln to acquire Neptune’s operations in Norway.

Changing market

“This agreement represents a further example of Eni adapting to the demands of the changing energy market and in this case deploying our successful Satellite Model,” said Eni Chief Executive Claudio Descalzi.

“It affords the opportunity to build scale, realising efficient upstream growth and maximising value under a dedicated and focused management structure supported by Eni resources and expertise,” Descalzi added.

“We have moved quickly after the acquisition by Eni of Neptune Energy to transform our competitive position in the UK and we see the opportunity for Eni and Ithaca to realise material long-term value in helping to address the key challenges of security, affordability and sustainability of energy supply,” the CEO stated.

Elixir Energy Ltd, the Australian-listed exploration and production company, said it aimed to demonstrate early in the New Year a commercial flow-rate from its pilot Nomgon coalbed methane (CBM) project located in the south of Mongolia near the Chinese border.

The leading Western subsea oil and gas field services companies Schlumberger, Aker Solutions and Subsea 7 plan to join forces to form a separate joint venture to deliver a step change in subsea production economics as energy exploration and production is set to gather pace amid the supply crisis.

The three companies propose to help customers unlock reserves, reduce time to first oil and lower development costs while simultaneously delivering on their decarbonization objectives.

The proposed joint venture will comprise the subsea businesses of Schlumberger and Aker Solutions, with Subsea 7 purchasing 10 percent of the joint venture for $306.5 million.

“This combination brings together deep reservoir domain and engineering design expertise, an extensive field-proven subsea production and processing technology portfolio, world-class manufacturing scale and capabilities, and a comprehensive suite of life-of-field solutions to customers all over the world,” said a statement.

It added that the transaction was subject to regulatory approvals as well as other customary closing conditions and is expected to close during the second half of 2023.

Following completion of the transaction, Schlumberger will own 70 percent of the joint venture, with Aker and Subsea 7 owning 20 percent and 10 percent respectively.

Transaction details

The Board of Directors of the joint venture will consist of three representatives from Schlumberger, two from Aker and one from Subsea 7.

The new joint venture will form part of the Subsea Integration Alliance, currently an unincorporated alliance between Schlumberger and Subsea 7.

The alliance will be extended by 10 years from the transaction completion date.

“This joint venture will bring together world-class businesses that are uniquely positioned to provide subsea technologies to help our customers improve recovery and reduce overall subsea development costs,” said Olivier Le Peuch, Chief Executive of Schlumberger, whose main offices are in Paris and Houston.

“Customers will benefit from enhanced services that leverage digital and technology innovation to drive improved performance while increasing energy efficiency and reducing CO2 emissions,” added Le Peuch.

Schlumberger CEO Peuch had forecast in January 2022 that a super-cycle may be underway for natural gas and oil markets.

Kjetel Digre, CEO of Norway-based Aker Solutions, said that by combining strong and complimentary competence and technologies, this compelling combination will deliver an industry step-change that will benefit all involved and the customers.

Economics case

“The offshore market activity is increasing, and this joint venture will drive enhanced offerings both in terms of subsea production economic,” added Digre.

John Evans, CEO of Subsea 7, said he was excited to build on the highly successful alliance with Schlumberger and partnership with Aker Solutions.

“This new joint venture is a critical step as we collaborate on the integrated subsea projects that drive maximum value for our customers,” added Evans for Subsea 7, headquartered in London and domiciled in Luxembourg.

Other transaction details show that Aker will receive $306.5M from Schlumberger which will be settled in the form of shares in Schlumberger.

The shares will be settled based on the volume-weighted average trading price of Schlumberger shares in the 10 business days preceding the closing of the transaction and are subject to a lock-up period of a minimum of 180 days.

Subsea 7 will purchase a 10 percent interest in the joint venture from Aker Solutions for $306.5M, which will be settled in cash.

Of this, 50 percent will be settled upon closing of the transaction and the remainder will be settled, with interest, by June 30, 2024.

Aker will receive $87.5M in proceeds from a vendor note from the joint venture. Of this, at least 50 percent will be paid, with interest, one year after the transaction closes and the remainder within two years.

Russian natural gas pipeline giant Gazprom, owner of the Sakhalin LNG export plant in the Russian Far East, has sent a delegation to meet leaders in Bangladesh to discuss energy cooperation in exploration and production and LNG.