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.

Shell reported a drop in fourth-quarter and annual profits as oil and gas prices declined from last year while the UK major’s LNG sales increased to over 67 million tonnes for the year.

The North Sea Transition Authority (NSTA), the UK regulator seeking more oil and gas exploration and production in British territorial waters that will affect future import needs for pipeline gas, LNG and oil has offered a total of 24 licences in the second tranche of the 33rd oil and gas licensing round.

UK major Shell expects to take non-cash impairment charges of between $2.5 billion to $4.5Bln for the fourth quarter, mainly related to the Singapore refining and chemicals hub that Shell is seeking to sell off, though quarterly income attributable to shareholders was expected to remain at around $7 billion.

The largest European energy major Shell posted a 47 percent drop in overall quarterly profits, reflecting lower LNG trading and optimisation results and a drop in oil and gas prices as well as refining margins.

Malaysian energy company Petronas and Indonesian state-owned oil and gas company Pertamina have agreed with Shell to jointly acquire the UK company’s minority Masela natural gas block in Indonesian waters that will underpin the Abadi LNG export project in Indonesia and boost future cargo availability in the Pacific Basin.

The decline of the UK oil and gas industry with the country being a net importer of oil and natural gas by gas pipelines and as LNG after being a net exporter for over 25 years has been further illustrated by Japan’s Mitsui now taking over UK energy pipeline services and technology specialist STATS.

NewMed Energy, the Israeli natural gas company and LNG project developer in the East Mediterranean, has taken a positive final investment decision for a third natural gas pipeline for production wells in the Leviathan gas field amid LNG export and domestic supply plans.

BW Offshore, the global operator of floating production, storage and offloading (FPSO) units, said the Barossa natural gas project for the Timor Sea was progressing as part of plans to prolong the lifespan of the Australian Darwin LNG export plant.

BW Offshore, which has main offices in Oslo and Singapore, said it continued to execute the Barossa FPSO project with overall completion on schedule at 67 percent at the end of April 2023.

“Hull blocks have been assembled in the floating dock and preparations for float out are progressing, with major equipment arriving at the topside construction yard,” explained BW Offshore in its first-quarter earnings report.

The company said that it also progressed its strategy of capturing value from non-core assets with the sale of “BW Opportunity” in the first quarter and the subsequent divestment of “BW Athena” in April.

Operator

The Darwin plant in the Northern Territory is operated by Adelaide-based Santos with capacity to produce around 3.7 million tonnes of LNG per annum, mainly for Japanese buyers, including JERA Co. Inc, the Asian nation’s largest LNG importer and power group.

The Japanese have participated in the Darwin LNG project since 2003 through the power companies that formed JERA and when the Australian plant was first operated by ConocoPhillips before the US major sold its stake to Santos.

Darwin LNG was constructed to receive feed gas from the Bayu-Undan gas field, located in the Timor Sea, and had contributed to the stable supply of LNG for almost 17 years before becoming depleted.

BW Offshore reported net profit for first quarter of $17.8 million, down from $41.3M in the previous quarter and $46.3M in the first three months of 2022.

“We deliver on our plan to generate value from our asset base through divestments and are discussing potential redeployment-related work for ‘BW Opportunity’ with its new owner,” said Marco Beenen, Chief Executive of BW Offshore.

“This reflects a strong FPSO market with oil and gas companies seeking efficient solutions for safe, secure and reliable production,” added Beenen.

Gross operating income for the three months came to $79.0M, down from $84.4M in the prior-year quarter and $104.9M in the previous quarter.

Outlook

“The reduction is largely due to a non-recurring reimbursement recorded in fourth quarter 2022 for expenses incurred under the limited notice to proceed (LNTP) contract with Shell for the Gato do Mato (Brazil) project,” said BW Offshore.

In its Outlook, BW Offshore said it expected that the core units in the existing fleet would continue to “generate significant cash flow” in the time ahead supported by the $5.8Bln of firm contract backlog at end of March 2023, including the Barossa contract.

“The company is experiencing continued strong interest for infrastructure-type lease and operate FPSO projects, combined with continued access to equity and debt financing for field development initiatives with long-term production, low break-even costs and low carbon emissions,” it stated.

“Discussions are ongoing with the buyer of ‘BW Opportunity’ for EPCC work and an operations and maintenance contract related to a redeployment of the FPSO which can drive growth in the FPSO segment,” added BW Offshore.

Shell, Europe’s largest oil and gas major and LNG market player, has won a landmark ruling from the Supreme Court of the United Kingdom against claims over on oil spill in Nigeria where Shell is still a shareholder in Nigerian oil and gas assets and the LNG plant.