LNG

Chesapeake Energy Corp. and Southwestern Energy Co., two companies that helped enable the start of US liquefied natural gas exports by providing low-priced feed-gas, are reported to be on the verge of a merger deal as early as this week to create a $16.7 billion company that would be the nation’s largest natural gas producer.

ExxonMobil Corp., the largest US oil company and leading LNG producer as a partner of Qatar, agreed to acquire Texas-based Pioneer Natural Resources for $59.5 billion and with an enterprise value of $64.5Bln in the largest acquisition since the historic tie-up between Exxon and Mobil in 1999.

Williams Companies, a leading US natural gas pipelines operator, has outlined plans for supplying more feed-gas for liquefied natural gas export plants on the Gulf Coast and to meet the nation’s growing needs for gas-fired power.

TC Energy, the North American pipeline company and key supplier of feed gas for the liquefied natural gas industry, plans to split up by spinning off its oil pipeline business and focusing on transporting natural gas.

The US Government expects the benchmark Henry Hub natural gas price to increase along with gas-fired power demand and rising feed-gas supplies for liquefied natural gas exports as dry gas production stalls.

US energy infrastructure company ONEOK Inc. has signed a definitive merger agreement with Magellan Midstream Partners in a cash-and-stock transaction valued at around $18.8 billion to combine the two Oklahoma-based energy groups.

Kinder Morgan Inc. (KMI) the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure developer, reported an increase in fourth-quarter net income and planned to expand its network to meet soaring LNG feed-gas demand.

Hancock Energy, the oil and gas company run by entrepreneur Gina Rinehart, has increased its bid for the Perth Basin natural gas company Warrego Energy by almost 30 percent and has now outbid mining company Mineral Resources for the prize of a gas field stake with LNG feed-gas potential.

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.

Kinder Morgan Inc., the US pipeline giant transporting natural gas to LNG plants and to customers around America, has taken a positive investment decision to expand the Permian Highway Pipeline (PHP) expansion project after securing binding firm transportation agreements for all available capacity.