LNG

TechnipFMC, the US oil and gas services company, has been awarded a large contract by Energean Plc to help develop the new Katlan natural gas field offshore Israel in the East Mediterranean.

Challenger Energy, the Americas-focused and London-listed exploration and production company, has formally signed the Area 3 licence offshore Uruguay where field resources include around 9 trillion cubic feet of gas.

The Area 3 licence was awarded under the Open Uruguay Round process and, following final regulatory approvals being granted, was signed in Montevideo on March 7.

“Accordingly, the Area 3 first exploration period will commence on 7th June 2024 and will run for four years, until 6th June 2028,” said Challenger.

Depth and range

The Area 3 licence covers an area of 13,252 square kilometres located in relatively shallow water depths (from 20 metres to 1,000 metres) around 100 kms (62 miles) off the Uruguayan coast.

“The block has substantial existing 2D and 3D seismic coverage, with two previously identified material prospects possessing currently estimated gross resource potential of up to 2 billion barrels of oil and up to 9 Tcf of natural gas,” said Challenger.

Uruguay’s state-owned oil and gas company ANCAP awarded Challenger with the Area 1 block licence in May 2020 and the company confirmed a farm-out process for the block three years later.

“Thanks to the farm-out agreement with Chevron Corp., the company is in the process of divesting a 60 percent interest in the Area 1 block,” explained Challenger.

During the initial exploration period, the Company's minimum work obligations on the Area 3 block are relatively modest, comprising licensing and reprocessing of 1,000km of legacy 2D seismic data and undertaking two geotechnical studies.

“The company intends to follow a similar strategy to that successfully adopted for the Area 1 licence (the farm-out of which to Chevron was announced on 6th March 2024), specifically to accelerate its technical work programme including additional discretionary work,” Challenger added.

Strong position

Eytan Uliel, Chief Executive of Challenger, said that the signing of the Area 3 licence cements the company’s position as a significant industry participant in Uruguay's offshore.

“It represents a successful expansion of the company's business in Uruguay, a country that has fast become one of the world's frontier exploration hotspots,” explained Uliel.

“We believe that Area 3 has strong technical merit and offers an exciting value-creation opportunity,” the CEO stated.

Challenger noted that to the east is the Brazilian maritime border, an area that was subject to considerable licensing in December 2023, with 13 nearby Brazilian blocks licenced variously to Chevron, Shell, China National Offshore Oil Corp. and Brazil’s Petrobras.

To the south, the block is adjacent to two deepwater Uruguayan blocks, Area 6, held by Houston, Texas-based APA Corp. and Area 7, which is held by Shell.

Chevron Corp., the US major oil and gas company with LNG operations in Australia and Africa, has received a vote of confidence from US investor Warren Buffett whose Berkshire Hathaway has taken its stake to almost 7 percent.

Buffett’s Berkshire Hathaway has increased its stake in San Ramon, California-based Chevron by over 15.84 million shares.

This transaction has brought Berkshire Hathaway's total share count in Chevron to 126.09M shares, representing about 5.96 percent of Buffett’s investment portfolio and 6.81 percent of Chevron's outstanding shares.

Lower price

According to Berkshire Hathaway data, the Chevron shares were acquired at an average price of $149.16 each and were valued at $18.80 billion.

Buffett is a celebrity figure among America’s small retail investors and is known to his fans as “The Oracle of Omaha”.

Buffett’s other main energy investment is in Houston, Texas-based Occidental Petroleum which forms 4.19 percent of the Berkshire Hathaway portfolio. The Buffett firm also has a huge 50 percent represented by shares in Apple Inc.

Chevron’s shares have recently risen to $154.63 per share, backed by positive earnings and the company’s acquisition agreement signed in October 2023 with US oil and gas company Hess Corp.

The value of the Buffett stake has already risen and at current prices on February 19, 2024, is now worth just short of $20Bln at $19.49Bln.

Chevron recently reported annual net profits of $21.41Bln, down from $35.60Bln in the previous year, though apart from 2022 the Chevron performance was the strongest since 2013.

LNG projects advance

Chevron listed among its highlights as achieving first natural gas production from the Gorgon Stage 2 development in Western Australia where its operates both the Gorgon LNG and Wheatstone LNG export plants.

Chevron also reached a final investment decision with partners to construct a third gathering pipeline that is expected to increase natural gas production capacity at the Leviathan gas field and a future LNG hub in the East Mediterranean offshore Israel.

The company additionally expanded the Bayou Bend carbon-capture and sequestration project on the US Gulf Coast through an acquisition of nearly 100,000 acres.

However, Chevron assets in the Permian Basin in Texas and New Mexico also helped to underpin the earnings.

Chevron posted an increase in its Permian production by 10 percent in 2023 with US quarterly output coming to 1.16 million barrels per day compared with 895,000 barrels per day, helped by the 2023 acquisition of US independent oil and gas company PDC Energy.

Chevron is also paying $53Bln for New York-based Hess, giving it access to major oil discoveries in the South American nation of Guyana as well as more US shale assets in the Bakken Shale Basin of North Dakota.

NuStar Energy, the US liquids terminal and pipelines operator with 9,500 miles of pipeline and 63 terminal and storage facilities, has been acquired by Sunoco LP, the motor fuels distributor, in an all-equity transaction valued at $7.3 billion including assumed debt.

The takeover of NuStar is the latest in US energy industry mergers over the past 12 months involving majors like ExxonMobil Corp. and Chevron Corp. as well as natural players like Chesapeake Energy.

The buyer Sunoco LP is a master limited partnership with core operations that include the distribution of fuel at 10,000 convenience stores, independent dealers and distributors located in more than 40 US states and the general partner owner is Dallas-based natural gas pipelines operator Energy Transfer LP.

Under the terms of the agreement, NuStar common unit-holders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24 percent premium as of January 19.

Refinancing

Sunoco said it had secured a $1.6 billion 364-day bridge term loan to refinance NuStar’s notes and revolving credit facilities and financing agreements

Under the terms, around $3.1Bln of Sunoco equity will be issued to NS unit-holders, though secondly a total of $2.6Bln of existing NS Senior Notes and GoZone Bonds will remain outstanding.

And thirdly, $1.6Bln of NS preferred equity and outstanding notes and borrowings will be refinanced.

“The transaction has been unanimously approved by the board of directors of both companies and is expected to close in the second quarter of 2024 upon the satisfaction of closing conditions, including approval by NuStar’s unit-holders and customary regulatory approvals,” said the statement on the transaction.

The companies said that the strategic rationale of the deal was that it increased stability by diversifying the business, adding scale and capturing the “benefits of vertical integration” that comes with the combination.

NuStar, headquartered in San Antonio, Texas, will bring complementary assets to the deal with the pipelines and terminals and growing renewables business as well as its Permian crude gathering system anchored by high-quality acreage and investment-grade customers.

Stable foundation

Sunoco’s main business makes it the largest US independent fuel distributor and with a “stable foundation” from long-term take-or-pay agreements with 7-Eleven stores, seven-to-10 fuel supply agreements, a real estate portfolio generating stable lease income as well as 42 fuel product terminals.

The previous US deal in an active year for mergers and acquisitions was Talos Energy, the US oil and gas company, acquiring operator QuarterNorth Energy in a $1.29Bln cash and stock deal announced on January 16 to boost its presence in the Gulf of Mexico.

It was the latest in a long list of US energy M&A moves that included several mega-deals.

Chesapeake Energy on January 12 announced a deal to buy smaller market rival Southwestern Energy.

Chesapeake’s transaction was for $7.4Bln in stock and to create a company that will be the nation’s largest natural gas producer.

Natural gas and oil

The combined Chesapeake-Southwestern company will also assume a new name at the closing of that transaction.

In earlier mega-deals, ExxonMobil in October 2023 announced the acquisition of Pioneer Natural Resources, the biggest oil producer in Texas, in a $60Bln all-stock deal.

In the same month, Chevron Corp. finalised an agreement to acquire Hess Corp. for $53Bln.

Occidental Petroleum then announced the acquisition of CrownRock for nearly $12Bln in December 2023 and in early January 2024 Houston-based APA, one of whose subsidiaries is Apache Corp., said it had agreed to acquire Callon Petroleum for $4.5Bln.

Talos Energy, the US oil and gas company, has acquired the operator QuarterNorth Energy in a $1.29 billion cash and stock deal to boost its presence in the Gulf of Mexico in the latest of a long list of US energy industry mergers and acquisitions that included several mega-deals.

Northern Oil and Gas Inc., the US energy company based in Minneapolis, is proceeding with two acquisition transactions for natural gas in the Appalachian Basin and oil and gas in the Northern Delaware Basin in an action-filled year of US merger and acquisition activity.

Italian oil and gas and LNG project engineering company Saipem, which has extensive global subsea and pipeline expertise, said it reached “new and important project” landmarks by contributing to the start of production of the Payara field, offshore the tiny nation of Guyana in the northeast corner of South America.

The start of production of the offshore oil field is the third project to which Saipem has contributed in the Stabroek Block

The field is operated by a consortium comprising US major ExxonMobil Corp, New York-based Hess Corp., currently being acquired by Chevron Corp., and the Chinese major China National Offshore Oil Corp.

Saipem contributed to the project development by providing engineering, procurement, construction and installation of the underwater facilities.

Saipem installed over 130 kilometres of thick rigid pipelines and risers in about 2,000 metres of water depth.

Guyana reserves

Guyana is among the leading oil and gas reserve holders in Latin America and will be a future large exporter of hydrocarbons along with Argentina, Brazil and Mexico as well as LNG producers Peru and Trinidad and Tobago.

The contract was fully released in 2020 by ExxonMobil Guyana and Saipem said its leading subsea assets such as “FDS2” and “Saipem Constellation” were deployed to carry out the project.

Furthermore, Saipem used its fabrication facility in Georgetown, Guyana, for the fabrication of 48 rigid jumpers, ensuring important local activity and jobs and enhancing sustainable investment in the country.

“Saipem has a consolidated presence in the country, having previously contributed to the development of the two phases of the Liza Project and to the start of the Yellowtail Project,” said the Milan-based company.

Guyana economic boost

The International Energy Agency noted that oil will be required for vehicle transport in the South American and Caribbean region well through 2050.

“Oil production has been rising in Brazil and Guyana, while it is in decline in Venezuela and Mexico,” said the IEA.

“Increased demand and prices for liquefied natural gas has also shone a spotlight on the important role played by LNG exporters such as Trinidad and Tobago and Peru in easing market tightness,” the Paris-based agency added.

Oil currently accounts for 86 percent of energy consumption today in the Latin American transport sector compared with 91 percent globally.

“The share of oil in road transport will decline below 80 percent by 2030 to around 40 percent by 2050,” said the IEA, forecasting that 60 percent of bus and other vehicle transport will come from the “growing use of electricity and bioenergy” vehicles.

“However, rising incomes also prompts an increase in the ownership of appliances and air conditioners, which are the main drivers of electricity consumption growth,” it added.

French major TotalEnergies, a shareholder in the Angola LNG export plant, has finalized the sale for $400 million to a unit of Malaysian energy company Petronas of a stake in Block 20 in the Kwanza Basin offshore the Angolan coast.

Chevron Corp., the leading LNG production company with operated plants from Australia to Angola, reported 5 percent higher first-quarter earnings, rising to $6.57 billion and noted that planned LNG maintenance was scheduled in the second quarter.

Chevron Corp. more than doubled net income in 2022 as oil and gas sales increased at higher prices and LNG export demand soared in the Atlantic and Pacific basins.

Chevron reported annual net income of $35.60 billion for the upstream and downstream divisions combined compared with $15.68Bln in the previous year as well as posting higher quarterly earnings.

For the fourth quarter, Chevron registered $6.37Bbln of profits versus $5.08Bln in the same three months of 2021 to the end of December.

Revenues in 2022 increased by 52 percent to $246.25Bln compared with $162.46Bln in the previous year from key assets in areas such as the Permian Basin, the Eastern Mediterranean and LNG export projects such as Gorgon and Wheatstone in Western Australia and Angola LNG in southwest Africa,

Fourth-quarter revenues jumped to $56.47Bln from $48.13 in the prior-year quarter.

“We delivered record earnings and cash flow in 2022, while increasing investments and growing US production to a company record,” said Mike Wirth, Chevron’s Chairman and Chief Executive.

US production

“The company’s investments increased by more than 75 percent from 2021, and annual US production increased to 1.2 million barrels of oil equivalent per day, led by 16 percent growth in Permian Basin unconventional production,” explained Wirth.

The San Ramon, California-based company said worldwide net oil-equivalent production was 3.01 million barrels per day in the fourth quarter 2022 and 3.00 million barrels per day for the full-year 2022.

Chevron added 1.1 billion barrels of net oil-equivalent proved reserves during last year.

“The largest net additions were from assets in the Permian Basin, Israel, Canada and the Gulf of Mexico” added Chevron.

The company also raised its quarterly dividend per share an additional 6 percent, to $1.51 per share, putting the company on track to increase its annual per share dividend for the 36th straight year.

In addition, the company’s board approved a new $75Bln share repurchase program.

Quarterly highlights

“We are well positioned to lead in both traditional and new energy businesses, while delivering higher returns, lower carbon and superior shareholder value,” declared Wirth.

Among Chevron’s quarterly highlights, the company listed the taking of final investment decisions on major integrated chemicals projects in Texas and Qatar for the company’s 50 percent owned affiliate, Chevron Phillips Chemical Company LLC.

Chevron also approved a project to expand the Tamar gas facility offshore Israel.

It additionally announced a “significant” new natural gas discovery at the Nargis block in the East Med offshore Egypt.

The US major is also going forward with the Ballymore project in the deepwater US Gulf of Mexico with design capacity of 75,000 barrels of crude oil per day.

Chevron increased it carbon-reduction plans with multiple carbon-capture projects, including the Bayou Bend storage project in the US Gulf Coast. It also received permits to assess carbon storage offshore Australia.