LNG

ExxonMobil Corp., the largest US oil and natural gas major, plans to acquire Denbury Inc., the developer of carbon-capture and storage (CCS) solutions and with assets in the LNG production hub area of the US Gulf Coast, for $4.9 billion in an all-share transaction.

ExxonMobil said it was making “great progress” on liquefied natural gas, with the Golden Pass project in Texas on track, and in energy projects around the world that will be critical to achieving its growth plans as it gave an overview of investment and delivery commitments.

ExxonMobil said upstream earnings potential was expected to double by 2027 from three years ago with more than 70 percent of capital investments being deployed in strategic developments in LNG projects around the world and in the US Permian Basin as well as in the South American nations of Guyana and Brazil.

The Irving, Texas-based major said that by 2027, upstream production is expected to grow by 500,000 oil-equivalent barrels per day to 4.2 million oil-equivalent barrels per day with more than 50 percent of the total to come from these key growth areas.

“Around 90 percent of upstream investments that bring on new oil and flowing gas production are expected to have returns greater than 10 percent at prices less than or equal to $35 per barrel, while also reducing upstream operated greenhouse-gas emissions intensity by 40-50 percent through 2030, compared to 2016 levels,” said ExxonMobil.

Corporate plan

The details came in ExxonMobil’s just issued corporate plan for the next five years, with a sizeable increase in investments aimed at emission reductions.

ExxonMobil’s priority LNG production areas are at the Golden Pass project in Texas, in the southeast African nation of Mozambique, in Papua New Guinea and in Qatar where its main partner is QatarEnergy.

The corporate plan through 2027 maintains annual capital expenditures at $20 billion to $25 billion, while growing lower-emissions investments to about $17Bln.

ExxonMobil forecast that earnings and cash flow growth was expected to double by 2027 compared with 2019.

There would also be share-repurchase program expanded up to $50Bln through 2024, including $15Bln in 2022.

“Our five-year plan is expected to drive leading business outcomes and is a continuation of the path that has delivered industry-leading results in 2022,” said Darren Woods, Chairman and Chief Executive.

“We view our success as an ‘and’ equation, one in which we can produce the energy and products society needs - and - be a leader in reducing greenhouse-gas emissions from our own operations and also those from other companies,” added Woods.

The corporate plan we’re laying out today reflects that view, and the results we’ve seen to date demonstrate that we’re on the right course.”

The company also remained on track to deliver a total of about $9 billion in structural cost reductions by year-end 2023 versus 2019.

In the Permian, the company said it was on track with its goal to reach net-zero Scope 1 and 2 emissions from its operated unconventional assets by 2030.

“We’re aggressively working to reduce greenhouse gas emissions from our operations, and our 2030 emission-reduction plans are on track to achieve a 40-50 percent reduction in upstream greenhouse-gas intensity, compared to 2016 levels,” added Woods.

“We will continue to advocate for clear and consistent government policies that accelerate progress to a lower-emissions future. At the same time, we’ll continue to work to provide solutions that can help customers in other industries reduce their emissions, especially in higher-emitting sectors of the economy like manufacturing, transportation and power generation,” stated the CEO.

ExxonMobil Corp., the long-standing partner of Qatar in oil and gas and LNG, has become as expected the fourth signatory of a joint venture stake in the North Field East LNG expansion project.

ExxonMobil Chairman and Chief Executive Darren W. Woods said the US major was still committed to its Mozambique liquefied natural gas project as well as to other ventures amid further delays, while cutting back immediately in US Permian Basin production.

McDermott International, the US LNG and energy engineering company overhauling its finances after Chapter 11 bankruptcy protection proceedings, said it was moving forward with the previously agreed sale of its Lummus Technology business.

McDermott said it had received no higher bids for Lummus and would now execute the previously announced share and asset purchase agreement to sell all of Lummus to a joint partnership between The Chatterjee Group, the New York-based investment fund, and Rhône Capital, a global private equity firm with offices in London and New York.

“McDermott did not receive a higher or better bid during the solicitation period, and the auction previously scheduled for Monday, March 9, 2020, will not occur,” explained the Houston-based company .

Subsidiaries of McDermott had entered into an agreement in January 2020 to sell Lummus to The Chatterjee Group and Rhône Capital for a base purchase price of $2.72 billion, subject to higher or otherwise better bids received through the court-supervised auction process. 

Under the terms of the agreement, McDermott will have the option to retain or purchase, as applicable, a 10 percent common equity ownership interest in the entity purchasing Lummus Technology.

McDermott said the sale hearing to confirm the sale of Lummus Technology to the joint partnership will take place on Thursday, March 12, 2020, at 9:00 am.

The equity-for-debt plan agreed with the court would eliminate more than $4.6Bln of McDermott’s debt.

The restructuring transaction has been implemented through a pre-packaged Chapter 11 process, which under US law gives protection from bankruptcy.

It is being financed by a debtor-in-possession (DIP) financing facility of $2.81 billion. 

“Proceeds from the sale of Lummus Technology are expected to repay McDermott's DIP financing in full, as well as fund emergence costs and provide cash to the balance sheet for long-term liquidity,” said the company.

McDermott is involved in some of the world’s leading LNG construction projects, including several on the US Gulf Coast and the North Field Expansion in Qatar.

Currently McDermott is working with other firms on both the Cameron LNG project at Hackberry in Louisiana and the Freeport export facility at Quintana Island in Texas.

McDermott has additionally been engaged as a contractor on the Golden Pass LNG export project for Qatar Petroleum and ExxonMobil venture in Texas.

The company has suffered financial problems since it completed the $6 billion deal in 2018 to buy LNG rival engineering, procurement and construction company Chicago Bridge & Iron (CB&I).

The restructuring transaction will strengthen its balance sheet and normalize its trade debt.

All of McDermott's businesses have operated as normal during the financial restructuring.

US exports of liquefied natural gas have been growing steadily to make the nation the world’s third-largest LNG exporter, averaging 4.2 billion cubic feet per day in the first five months of the year, exceeding Malaysia’s LNG shipments of 3.6 Bcf/d during the same period.

The US is expected to remain the third-largest LNG exporter in the world, behind Australia and Qatar, in 2019-2020.

“US shipments have risen as four new liquefaction Trains with a combined capacity of 2.4 Bcf/d, Sabine Pass Train 5, Corpus Christi Trains 1 and 2 and Cameron Train 1- started up since November 2018,” said the report from the US Energy Information Administration exploring current trends and prices.

“Although Asian countries have continued to account for a large share of US LNG exports, shipments to Europe have increased significantly since October 2018 and accounted for almost 40 percent of US LNG exports in the first five months of 2019,” added the EIA.

LNG exports to Europe surpassed exports to Asia for the first time in January 2019.

A warm winter in Asia and declining price differentials between European and Asian spot natural gas prices led to increased volumes of US LNG exports delivered to Europe.

Europe’s total LNG imports in the winter of 2018-2019 averaged 10.2 Bcf/d, 60 percent higher than in the previous two winters and the highest winter average since at least 2013.

“Total LNG imports in the three largest global LNG markets - Japan, China, and South Korea - started to decrease in February 2019 amid a milder-than-normal winter and, in Japan, the restart of nuclear power plants,” explained the report.

“Recent declines in price differentials between European pricing benchmarks (including National Balancing Point (NBP) in the UUK and Title Transfer Facility (TTF) in the Netherlands) and Asian spot LNG prices (including Japan LNG spot prices) have affected the flow of flexible (i.e., without a fixed destination specified in an offtake LNG contract) US LNG exports,” noted the EIA.

Because the round-trip transportation costs from the US Gulf Coast to Europe are about $1.50 per million British thermal units (MMBtu) lower than those to Asian markets, a sufficiently narrow price spread between European and Asian spot natural gas/LNG prices will make Europe the preferred destination for exporters of US LNG.

“The spread between Japan spot LNG and NBP/TTF prices was about $1.00/MMBtu in December 2018 and January 2019, and it reached a low of $0.60/MMBtu in April, which supported continued high US LNG exports to Europe,” said the EIA.

The EIA expects US LNG exports will continue to increase in 2019 as the first Trains at the two new liquefaction facilities (Freeport LNG in Texas and Elba Island LNG in Georgia) come online in the next few months.

In its latest Short-Term Energy Outlook, the EIA forecasts US LNG exports will average 4.8 Bcf/d in 2019 and 6.9 Bcf/d in 2020 as new liquefaction Trains at Cameron, Freeport, and Elba Island are commissioned in the next 18 months.

“By 2021, six US liquefaction projects are expected to be fully operational. Another two new US liquefaction projects (Golden Pass in Texas and Calcasieu Pass in Louisiana) that started construction this year are expected to come online by 2025,” stated the report.

The Qatari Q-Flex liquefied natural gas carrier, the “Al Safliyah”, has become the largest LNG vessel to transit the expanded Panama Canal in a test for future tanker movements that could improve the economics of the export plant build-out on the US Gulf Coast.

The 210,100 cubic metres capacity Qatari Q-Flex LNG carrier, the “Al Safliyah” will become the largest LNG vessel to transit the expanded Panama Canal next week.

Baker Hughes-GE, the energy services company and LNG equipment supplier, reported sluggish first-quarter earnings even as it logged two important turbomachinery contracts for projects in West Africa and the US Gulf Coast.