LNG

The US government’s short-term energy report for May forecasts falling first-half 2024 dry natural gas production while liquefied natural gas exports are set to rise in 2025, along with the benchmark Henry Hub gas price.

NuStar Energy, the US liquids terminal and pipelines operator with 9,500 miles of pipeline and 63 terminal and storage facilities, has been acquired by Sunoco LP, the motor fuels distributor, in an all-equity transaction valued at $7.3 billion including assumed debt.

The takeover of NuStar is the latest in US energy industry mergers over the past 12 months involving majors like ExxonMobil Corp. and Chevron Corp. as well as natural players like Chesapeake Energy.

The buyer Sunoco LP is a master limited partnership with core operations that include the distribution of fuel at 10,000 convenience stores, independent dealers and distributors located in more than 40 US states and the general partner owner is Dallas-based natural gas pipelines operator Energy Transfer LP.

Under the terms of the agreement, NuStar common unit-holders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24 percent premium as of January 19.

Refinancing

Sunoco said it had secured a $1.6 billion 364-day bridge term loan to refinance NuStar’s notes and revolving credit facilities and financing agreements

Under the terms, around $3.1Bln of Sunoco equity will be issued to NS unit-holders, though secondly a total of $2.6Bln of existing NS Senior Notes and GoZone Bonds will remain outstanding.

And thirdly, $1.6Bln of NS preferred equity and outstanding notes and borrowings will be refinanced.

“The transaction has been unanimously approved by the board of directors of both companies and is expected to close in the second quarter of 2024 upon the satisfaction of closing conditions, including approval by NuStar’s unit-holders and customary regulatory approvals,” said the statement on the transaction.

The companies said that the strategic rationale of the deal was that it increased stability by diversifying the business, adding scale and capturing the “benefits of vertical integration” that comes with the combination.

NuStar, headquartered in San Antonio, Texas, will bring complementary assets to the deal with the pipelines and terminals and growing renewables business as well as its Permian crude gathering system anchored by high-quality acreage and investment-grade customers.

Stable foundation

Sunoco’s main business makes it the largest US independent fuel distributor and with a “stable foundation” from long-term take-or-pay agreements with 7-Eleven stores, seven-to-10 fuel supply agreements, a real estate portfolio generating stable lease income as well as 42 fuel product terminals.

The previous US deal in an active year for mergers and acquisitions was Talos Energy, the US oil and gas company, acquiring operator QuarterNorth Energy in a $1.29Bln cash and stock deal announced on January 16 to boost its presence in the Gulf of Mexico.

It was the latest in a long list of US energy M&A moves that included several mega-deals.

Chesapeake Energy on January 12 announced a deal to buy smaller market rival Southwestern Energy.

Chesapeake’s transaction was for $7.4Bln in stock and to create a company that will be the nation’s largest natural gas producer.

Natural gas and oil

The combined Chesapeake-Southwestern company will also assume a new name at the closing of that transaction.

In earlier mega-deals, ExxonMobil in October 2023 announced the acquisition of Pioneer Natural Resources, the biggest oil producer in Texas, in a $60Bln all-stock deal.

In the same month, Chevron Corp. finalised an agreement to acquire Hess Corp. for $53Bln.

Occidental Petroleum then announced the acquisition of CrownRock for nearly $12Bln in December 2023 and in early January 2024 Houston-based APA, one of whose subsidiaries is Apache Corp., said it had agreed to acquire Callon Petroleum for $4.5Bln.

US natural gas supplies plunged and prices soared to almost $23 per million British thermal units at several Citygates as extreme cold froze some wells while heating demand soared for gas-fired power and the severe climatic conditions also curbed wind power availability.

The United States energy outlook for December has forecast lower benchmark Henry Hub natural gas spot prices for the rest of the winter heating season to March 2024 because of higher production and storage levels.

Northern Oil and Gas Inc., the US energy company based in Minneapolis, is proceeding with two acquisition transactions for natural gas in the Appalachian Basin and oil and gas in the Northern Delaware Basin in an action-filled year of US merger and acquisition activity.

Global natural gas and LNG prices were largely unaffected by Russia’s political and military unrest over the weekend as Russian oil and natural gas values have already been largely discounted by sanctions and the shutdown of the Nord Stream gas pipelines to Europe.

Pioneer Natural Resources, the biggest Texas oil producer and the largest acreage holder in the oil and gas-rich Permian Basin of the southwest US, reported fourth-quarter profits that were better than expected and said it would push ahead with drilling, completions, facilities and water infrastructure spending of up to $4.75 billion in 2023.

The US Government has issued a waiver of Jones Act shipping rules to help the US territory of Puerto Rico attract LNG shipments amid a tight market and high prices after the recent hurricane damage affected power supplies and energy stocks.

Targa Resources Corp., one of the largest US independent midstream infrastructure companies, has agreed to acquire Lucid Energy, a natural gas gathering and processing services company in the Delaware Basin from US asset managers for $3.55 billion in cash and the transaction will be completed in the third quarter.

An investigation is under way into the explosion at the Freeport liquefied natural gas export plant at Quintana Island in Texas that could reduce US Gulf Coast cargo shipments for up to three weeks, though the overall damage was now said to be limited.