LNG

Energy Transfer, the owner of pipeline and other assets in the Permian Basin and other shale basins in the Gulf Coast states as well as the Cushing crude oil delivery system and with a currently stalled LNG export project at Lake Charles, has signed a deal to acquire WTG Midstream for $3.25 billion in cash and shares.

The latest US oil and gas acquisition comes in the busiest year on record for US mergers and acquisitions numbering more than a dozen in the past 12 months and involving energy majors like ExxonMobil Corp. and Chevron Corp. as well as second-rung operators.

Energy Transfer said it was buying WTG Midstream from affiliates of US assets manager Stonepeak, the Davis Estate and Midland, Texas-based Diamondback Energy.

Transaction terms

The total consideration for the transaction will comprise $2.45Bln in cash and around 50.8 million newly issued Energy Transfer common units.

The transaction is expected to close in the third quarter of 2024, subject to regulatory approval and customary closing conditions.

Energy Transfer, based in Dallas, Texas, said that WTG provided comprehensive midstream services including wellhead gathering, intra-basin transportation and processing services.

“The company’s 6,000-mile pipeline network serves significant operators in some of the most active areas of the Midland Basin including Martin, Howard, Upton, Reagan and Irion counties,” said a statement on the deal.

WTG also operates eight processing plants with a total capacity of around 1.3 billion cubic feet per day and is constructing two new plants with an additional capacity of 0.4 Bcf per day.

The first new plant is expected to be in service in the third quarter of 2024 and the second plant the third quarter of 2025.

Huge portfolio

Energy Transfer currently owns and operates one of the largest portfolios of energy assets in the US comprising more than 125,000 miles of pipeline and associated energy infrastructure.

The company’s strategic network spans 44 states with assets in all of the major US production basins.

Energy Transfer’s acquisition also includes a 20 percent interest in BANGL Pipeline, a 425-mile Natural Gas Liquids pipeline with an initial capacity of 125,000 barrels per day, expandable up to more than 300,000 barrels per day and connecting the Permian Basin to markets on the Texas Gulf Coast.

“The company benefits from well positioned assets in the Permian which is the most active region in the US and this acquisition is expected to provide future upside as the basin continues to develop on and around Energy Transfer’s infrastructure,” explained the company.

RBC Capital Markets is serving as financial advisor to Energy Transfer, and Vinson & Elkins LLP is acting as Energy Transfer’s legal counsel on the transaction.

Jefferies LLC is serving as financial advisor to WTG and Sidley Austin LLP is acting as WTG’s legal counsel.

Woodside Energy, the operator of the Northwest Shelf and Pluto LNG export plants in Western Australia, has signed a sales and purchase agreement with Mexico Pacific Limited (MPL) to purchase 1.3 million tonnes per annum from the venture in the northern Mexican state of Sonora.

The US Supreme Court has removed all obstacles to completing the long-delayed $6-billion Mountain Valley Pipeline to send natural gas from West Virginia to the state of Virginia and onwards to consumers further South and being developed by energy company Equitrans Midstream.

The Court granted Mountain Valley Pipeline LLC's request to lift legal blockages imposed by a lower court that had halted construction of a final short section of the 303-mile (488km) natural gas pipeline.

That final section to be completed is a 3.5-mile (5.6km) corridor through the federally owned Jefferson National Forest.

The gas pipeline being developed by Canonsburg, Pennsylvania-based Equitrans has been delayed by numerous court decisions since construction began in 2018.

Investors

Equitrans is the lead partner building the pipeline with several other companies including NextEra Energy, Consolidated Edison, AltaGas and RGC Resources.

The Court’s ruling was in response to a request from Equitrans to overturn an appeals court orders in early July 2023 to stop building in the Jefferson National Forest while that court considered legal complaints from environmental groups against the project.

Legal challenges to the pipeline continued even after West Virginia Democratic Senator Joe Manchin and other politicians wrote to encourage a positive decision on the Mountain Valle Pipeline into the Debt Ceiling Bill in Congress.

“The Supreme Court has spoken and this decision to let construction of the Mountain Valley Pipeline move forward again is the correct one,” Manchin said in a statement issued by his office.

“I am relieved that the highest court in the land has upheld the law Congress passed and the President signed,” added Manchin.

Final stage

Equitrans had argued that if it did not resume construction soon, it would have been unable to complete before winter weather arrives in November and halts work until the Spring.

The pipeline is designed to transport natural gas from the prolific Marcellus and Utica Shale Basins to the growing demand markets of the mid-Atlantic and southeast regions of the US where LNG export projects are expanding.

The 42-inch diameter pipeline that will link an existing transmission and storage system in Wetzel County, West Virginia, to the Transco Station 165 in Virginia.

The pipeline has capacity of 2 billion cubic feet per day and is fully subscribed under long-term contracts with a diverse group of shippers.

Iberdrola, the Spanish utility company and former major liquefied natural player that sold most of its LNG portfolio to Pavilion Energy of Singapore in 2019, said it had agreed to sell 13 mostly gas-fired power plants in Mexico for $6 billion to the Mexican government.

The Mexican President Andrés Manuel López Obrador praised the deal with Iberdrola as a “new nationalization” of the electricity market in Mexico.

The Chairman of Iberdrola, Ignacio Galán, and Mexico’s President López Obrador, announced the deal after a meeting.

Iberdrola said the sales agreement was signed with an entity called Mexico Infrastructure Partners and involved 8,400 megawatts of capacity from 12 gas-fired plants and one 103 MW wind asset called La Venta III.

Iberdrola Chairman Galán said the Spanish utility was still committed to advancing the development of renewable energy in Mexico.

Strategy

“Iberdrola confirms its commitment to Mexico by reaffirming its leadership as the leading private generator of renewable energy with the backing of the Federal Government to continue operating its assets under market conditions and drive the energy transition in the country,” Galán explained.

“In addition, Iberdrola Mexico will continue to serve its existing customers and both parties will work together to try to resolve the various disputes that have arisen in the country in recent years,” the Iberdrola Chairman added.

Leftist President López Obrador had previously compared the attitudes of Iberdrola and several other companies to those of conquerors, a reference to the Spanish Conquistadors who had invaded South America and Mexico in the 16th Century.

Iberdrola had been a major LNG market participant until the 2019 transaction with Pavilion Energy when Iberdrola’s LNG assets were sold as part of the Spanish utility’s €3.5Bln ($3.8Bln) “non-strategic asset rotation” plan.

Mexico itself is a major importer of US pipeline natural gas as well as LNG and also has plans to be an LNG exporter.

New policy

The Mexican President said that the sales agreements for the 13 power plants allowed progress to be made on the implementation of Mexico's “new energy policy” for the future.

The transaction with Iberdrola gives the Mexico’s state-owned power company, Comisión Federal de Electricidad (CFE), or the Federal Electricity Commission, majority control over the electricity market.

“This means we're rescuing the Comisión Federal de Electricidad and this is a new nationalization of our electric industry,” stated López Obrador.

López Obrador added that the acquisition would take CFE's power generation holdings to almost 56 percent of Mexico's total, up from about 40 percent.

A statement said that the deal was expected to be completed within the next five months. 

TC Energy Corp., the North American pipeline and resources company with large-scale natural gas connections for the LNG sector in the US and Canada, has held its annual Investor Day with project and earnings forecast updates.

Delfin Midstream, the US liquefied natural gas developer, and US oil and gas exploration and production company, Devon Energy, have entered into an LNG export partnership.

The companies agreed to a strategic investment deal and a Heads of Agreement that would give Devon up to 2 million tonnes per annum of liquefaction capacity.

The Delfin floating LNG project is based on the deployment of vessel-borne liquefaction facilities with other moored production and storage vessels and recently asked the Federal Energy Regulatory Commission to extend the deadline for the onshore completions of the venture to the 28th of September 2023.

The Delfin developers have already been awarded a deepwater port licence by the US Maritime Administration (MARAD) and the project has been approved by the US Coast Guard.

Delfin is additionally seeking to construct, operate and maintain certain onshore metering, compression, and piping facilities located onshore in Cameron Parish in Louisiana.

Offshore Louisiana

Delfin, based in Houston, Texas, said the HOA provided the framework for finalizing a definitive long-term tolling agreement representing 1 MTPA of liquefaction capacity in Delfin’s first FLNG vessel offshore Louisiana, with the ability to add an additional 1 MTPA in Delfin’s first or a future FLNG unit.

In addition to providing Devon with up to 2 MTPA of total liquefaction on a long-term basis, the HOA also provides opportunities for additional future equity investments in Delfin.

“We are delighted to execute this agreement with Devon, representing a truly strategic partnership between a US producer and a liquefaction provider,” said Dudley Poston, Delfin Chief Executive.

“We believe our unique liquefaction solution provides significant structural flexibility that allows producers to maximize the value of their natural gas, while providing a much-needed source of additional supply to the world LNG marketplace,” added Poston.

Devon is a leading independent E&P company in the US with a premier multi-basin portfolio and a world-class acreage position in the Delaware Basin of West Texas and southern New Mexico.

Investment

“Our decision to invest in Delfin was the result of a thorough process intended to create additional pricing diversification for our natural gas portfolio and deliver a sustainable and capital efficient return for our shareholders,” said Rick Muncrief, Devon’s President and CEO.

“Devon has a strong track record of finding best-in-class midstream and downstream solutions for our production and we are excited to partner with Delfin to meet the need for safe, clean and reliable energy,” stated Muncrief.

Delfin has additionally signed a binding SPA with global commodities company Vitol and an HOA on supply with UK utility Centrica.

As a modular project requiring only 2 MTPA to 2.5 MTPA of long-term contracts to begin construction, and with all necessary permits in hand, Delfin is on schedule to make its FID on its first FLNG vessel by the end of 2022.

In the Delfin-Devon deal discussions, Latham & Watkins LLP served as legal advisor to Delfin and Kirkland & Ellis LLP was legal advisor to Devon.

The American Gas Association has elected Kimberly S. Greene of Atlanta, Georgia-based Southern Company Gas to Chair the AGA Board for 2022 at a challenging time for the US natural gas industry and a landmark time for the growing LNG export sector.

The US Government has issued its short-term energy outlook to take account of what it said was the second-largest daily oil price decline caused by the lack of an agreement between leading oil nations such as Saudi Arabia, Russia and other members of the Organization of Petroleum  Exporting Countries.

The United States expects daily natural gas requirements for LNG exports to increase by 36 percent during most of 2020 compared with 2019 and even higher by the end of 2020 as more liquefaction capacity comes on stream and existing plants ramp up production.