LNG

July 16 (LNGJ) - Energy Transfer, the owner of pipelines and other assets in the Permian Basin and the US Gulf Coast as well as the currently stalled LNG export project at Lake Charles in Louisiana, has completed the acquisition of WTG Midstream for $3.25 billion in cash and shares.

   Energy Transfer bought WTG from affiliates of US assets manager Stonepeak, the Davis Estate and Midland, Texas-based Diamondback Energy. The acquired assets add around 6,000 miles of gas gathering pipelines that extend the network in the Midland Basin as well as eight gas processing plants with a total capacity of 1.3 billion cubic feet per day and two additional processing plants which are under construction.

Freeport LNG, the US export facility on Quintana Island in Texas, is set for regular operations as port restrictions are lifted after Hurricane Beryl and as power supplies across the state are expected to be 80 percent restored by July 14.

US major ConocoPhillips has agreed to acquire Marathon Oil Corp., the US company and main shareholder in Equatorial Guinea LNG in West Africa as well as a key operator in the major US shale basins.

ExxonMobil Corp., the largest US oil company and leading LNG producer and a partner of Qatar in many global projects, will have its first-quarter 2024 earnings impacted by price shifts while also completing the sale of its stake in the Adriatic LNG import terminal offshore Italy and pursuing the huge takeover of Pioneer Natural Resources in the US.

ExxonMobil estimated that large decreases in oil, gas and fuel prices would deliver a first-quarter operating profit of between $6.65 billion and $11.6Bln for the first three months of the year compared with $7.63Bln in the fourth quarter of 2023.

ExxonMobil filed its first-quarter earnings indicator with the US Securities and Exchange Commission.

The ExxonMobil earnings total would be well below the prior-year first quarter when natural gas prices were much higher.

Weaker prices

Overall weaker oil and gas prices alone were expected to reduce ExxonMobil’s profits by about $600 million compared with the fourth quarter of 2023.

The company also said fuel derivatives adversely affected gains in gasoline and diesel margins, costing it about $1.1Bln compared with the fourth quarter.

Refining maintenance costs also increased during the fourth-quarter and the first quarter of the 2024.

“To give perspective regarding market and planned factors affecting 1Q 2024 results, we are providing the summary of items management believes will impact 1Q 2024 results relative to 4Q 2023 results,” said the company.

“These factors are generally limited to significant planned activities, market dynamics and seasonal demand patterns,” the filing explained.

“This is only intended to provide information regarding current estimates of these factors,” said the filing.

“It is not comprehensive of all changes between 4Q 2023 and 1Q 2024 results and is not an estimate of 1Q 2024 earnings for the Corporation,” ExxonMobil stated.

Adriatic LNG sale

Dutch energy storage group VTTI has also acquired the 70 percent stake previously held by ExxonMobil in Italy's biggest LNG terminal, the gravity-based structure facility Adriatic LNG, and the balance of 30 percent is now owned by Italian gas grid and terminals operator SNAM.

ExxonMobil had stated in March 2023 that it was considering selling its stake of just over 70 percent in Adriatic LNG as a non-core asset.

The Adriatic terminal is located 15 kilometres (9.3 miles) off the Veneto coastline of Italy and has been on line since 2009.

It includes two LNG storage tanks, each with a capacity of 125,000 cubic metres.

The operating company is called Terminale GNL Adriatico. ExxonMobil had held its majority stake while a QatarEnergy unit, Qatar Terminal Company, owned 22 percent and SNAM had held 7.3 percent.

ExxonMobil is also pursuing the all-stock deal to acquire Texas-based Pioneer Natural Resources for $59.5Bln.

The combination gives ExxonMobil a stronger position in the Permian Basin in Western Texas and New Mexico.

ExxonMobil is expected to report first-quarter earnings on April 26.

Enbridge Inc, the North American pipelines company, has signed an accord with two equity fund-linked firms and MPLX LP, a unit of Marathon Petroleum, to form a venture to develop, construct and operate natural gas pipeline and storage assets connecting Permian Basin supply to growing LNG and US Gulf Coast demand.

The joint venture will be owned by the WhiteWater and I Squared firms with a 50.6 percent stake, MPLX with 30.4 percent and Enbridge with 19.0 percent.

There assets base is widespread and strategic across the Texas gas hubs.

The assets include 100 percent interest in Whistler pipeline, a 450-mile, 42-inch intrastate pipeline transporting natural gas from an interconnect with the Waha Header in the Permian Basin to Agua Dulce in Texas, near to the starting point of the proposed Rio Bravo pipeline and LNG plant.

NextDecade project

They will also own a 100 percent interest in the Rio Bravo pipeline project comprising 137 miles of new 42-inch and 48-inch pipelines transporting natural gas from the Agua Dulce supply area to NextDecade's Rio Grande LNG export project in Brownsville, Texas.

The joint venture will additionally own a 70 percent interest in the in Agua Dulce-to-Corpus Christi (ADCC) pipeline, a 40-mile, 42-inch proposed intrastate pipeline designed to transport 1.7 billion cubic feet per day of natural gas from the terminus of the Whistler pipeline in Agua Dulce to Cheniere Energy’s Corpus Christi LNG export facility.

The ADCC pipeline is expected to be in-service in the third quarter of 2024 and is expandable up to 2.5 Bcf per day.

Enbridge, based in Calgary, Alberta, noted that around 98 percent of capacity in the venture is contracted under long-term, take-or-pay contracts with an average contract length greater than 10 years.

The final part of the venture is a 50 percent interest in Waha Gas Storage, a 2.0 Bcf gas storage cavern facility, with additional topside infrastructure capable of making injections and withdrawals.

“Upon closing of the transaction, Enbridge will contribute its wholly-owned Rio Bravo pipeline project and US$350 million in cash to the joint venture, and will fund the first US$150M of the post-closing capex to complete the Rio Bravo pipeline project,” said a statement.

Investment grade

“Enbridge will receive a 19 percent equity interest in the joint venture and retain a 25 percent economic interest in the Rio Bravo pipeline project, subject to certain redemption rights of the joint venture partners.” it added.

The counterparties in the venture are mostly investment grade and include leading operators in the Permian Basin.

“This is a great way to enhance our super-system approach, bringing energy supply to places where it is needed most and providing last mile connectivity to domestic and export customers,” said Cynthia Hansen, President of Gas Transmission and Midstream at Enbridge.

Enbridge will be contributing its Rio Bravo pipeline project, which will extend the joint venture's current infrastructure to serve LNG and other customers on the US Gulf Coast.

Enbridge's share of the post-closing capex to complete the Rio Bravo pipeline project will be 100 percent of the first US$150M and thereafter proportionate to its aggregate economic interest in that project.

“The transaction optimizes our investment capacity by increasing the efficiency of our capital,” said Pat Murray, Chief Financial Officer of Enbridge.

“We will begin receiving immediate cash flow and will share in future growth opportunities,” Murray stated.

“Having access to new Permian natural gas infrastructure enhances and increases the visibility of our medium-term growth outlook, while being accretive to our balance sheet,” he concluded.

The joint venture agreement is expected to close in the second quarter of 2024, subject to receipt of required regulatory approvals and the satisfaction of other customary closing conditions.

Diamondback Energy, the Texas-based company listed on the Nasdaq global exchange, has agreed to acquire privately-held Endeavor Energy Resources in a transaction valued at $26 billion to create a premier operator in oil and associated natural gas in the Permian Basin of West Texas and New Mexico.

Saudi Arabia, which is buying LNG assets for the first time through Saudi Aramco, said that recent multi-billion dollar agreed acquisitions during October by US oil majors ExxonMobil Corp. and Chevron Corp. for Pioneer Natural Resources and Hess Corp. respectively for combined sums of more than $112 billion in stock proved that hydrocarbons were “here to stay” in the global energy future.

“Exxon and Chevron didn't buy because they want to have stranded assets,” said Saudi Energy Minister Prince Abdulaziz bin Salman at Riyadh's annual Future Investment Initiative (FII) conference and added that the US combinations for oil and gas could not have come at a “better time” for the industry.

The US takeover deals have drawn criticism from environmentalist activists who regard the merger and acquisition activities as undermining ambitious climate change aims that are increasingly costly and are beginning to affect energy security requirements of nations.

Aramco LNG

Saudi Aramco, the world’s largest oil production group, has signed definitive agreements to acquire a strategic minority stake in a company called MidOcean, a unit of Washington DC-based equity fund EIG for $500 million and thus entering the LNG sector initially in Australia.

Prince Abdulaziz said in the Riyadh's speech that the energy transition would require hydrocarbons including petrochemicals which are vital for sectors such as pharmaceuticals and industry manufacturing.

The International Energy Agency (IEA) argued in its World Energy Outlook issued on October 24 that world fossil fuel demand was set to peak by 2030 as more electric cars were being purchased and China's economy was forced to grow more slowly amid changes centred on renewable energy.

The IEA's forecasts run counter to those of the Organization of the Petroleum Exporting Countries (OPEC), which sees oil demand rising long after 2030 and which would require trillions in new oil sector investment.

Saudi Arabia is the world's biggest oil exporter and intends to increase its oil production capacity by 1 million barrels per day to 13 million barrels per day by 2027 to meet increasing global demand.

Future oil demand

“We are investing not to create a stranded asset. Saudi Arabia would not be investing in raising its capacity if there was not sufficient demand for additional production,” he added.

Analysts noted that the US takeovers by ExxonMobil and Chevron have also focused on US shale oil and natural gas assets and have re-evaluated them upwards.

The Chevron and ExxonMobil deals have increased portfolio assets in premier US shale basins like the Bakken in North Dakota and the Permian in Texas

Other assets that will be acquired when the deals are approved include oil and gas blocks in South America and the Gulf of Mexico.

Hess’s Bakken assets added another leading US shale position to Chevron’s DJ basin and Permian basin operations and will further strengthen US domestic energy security.

In ExxonMobil’s case it agreed to pay an 18 percent premium for Pioneer’s prized assets relative to its share price.

The acquisition of Permian acreage by ExxonMobil provides shale oil, natural gas and liquids for the global and US markets as well as growing LNG feed-gas volumes from associated gas.

ExxonMobil Corp., the largest US oil company and leading LNG producer and a partner of Qatar, continues in talks to acquire Texas-based Pioneer Natural Resources in what would be its largest acquisition since the historic tie-up between Exxon and Mobil in 1999. 

Chevron Corp., the oil and gas major and leading LNG producer, said the mandatory retirement age for President and Chief Executive Mike Wirth had been waived by the company and he would be staying on as Chevron also provided a preview of likely second-quarter earnings.

ExxonMobil Corp., the largest US oil company and leading LNG producer and a partner of Qatar, said changes in natural gas prices would impact its second-quarter Upstream earnings by $1.8 billion to $2.2 billion compared with the first quarter even as the company was also overhauling trading activities and embarking on oil projects in Guyana and LNG expansion.