Russia’s state-controlled OAO Gazprom plans to acquire 72.7% of oil company OAO Sibneft for $13.1 billion in a transaction that will raise Gazprom’s total stake in Sibneft to 75.7%.
In other recent company news:
• A unit of OAO Lukoil agreed to pay $2 billion, or $2.10/share, to acquire 100% of Nelson Resources Ltd., Toronto, in Lukoil’s efforts to increase its reserves in Kazakhstan.
• Chesapeake Energy Corp. announced an agreement to acquire Columbia Natural Resources LLC from Triana Energy Holdings LLC for $2.95 billion, including the assumption of $75 million in debt and liabilities related to CNR’s prepaid sales agreement and hedging positions.
• EnCana Corp., Calgary, agreed to sell all its oil and pipeline holdings in Ecuador to Andes Petroleum Co., a consortium of Chinese oil companies led by China National Petroleum Corp, for $1.42 billion.
Gazprom-Sibneft
Gazprom is buying the interest from Roman Abramovich through his investment company, Millhouse Capital.
“The deal is being struck in accordance with current legislation,” said a brief statement posted on the Gazprom web site. It added that the two sides had signed binding documents. The transaction awaits approval by Gazprom’s board.
Sibneft reported worldwide reserves of 2.366 billion bbl of oil and 551 tcf of natural gas for 2004. It produced 250 million bbl of oil and an estimated 49 bcf of gas during the year and had assets totaling $10.26 billion (OGJ, Sept. 19, 2005, p. 44).
Sibneft and its subsidiaries hold about 45 exploration and production licenses in the Yamal-Nenets and Khanti-Mansiisk autonomous regions of West Siberia, in the Omsk and Tomsk regions, and in Chukotka.
Four of its five largest oil fields are in the Noyabrsk area-Sugmutskoye, Sutorminskoye, Vyngapurovskoye, and Sporyshevskoye-and account for nearly half of its reserves. Its Sibneft-Yugra subsidiary holds a development license for Siberia’s giant Priobskoye oil field.
Sibir Energy PLC, London, in July filed a fraud case against Sibneft in the British Virgin Islands alleging dilution of interests of Sibir subsidiary Yugraneft in Sibneft-Yugra. Sibir says Yugraneft had a joint venture agreement with Sibneft-Yugra for development of Palyanovskoye field and southern Priobskoye field and that share distributions by Sibneft in 2002 and 2003 reduced Sibir’s interest in Sibneft-Yugra to less than 1% from 50%.
Sibneft also owns a 390,000 b/d refinery at Omsk and has a 38.5% share in the 200,000 b/d Moscow Oil Refinery, in which Sibir also holds an interest.
Lukoil-Nelson Resources
Lukoil’s Sept. 30 announcement came after 65% of Nelson shareholders agreed to sell their stock to Lukoil Overseas Holdings Ltd., which plans to extend the offer to minority shareholders at the same price.
Nelson Resources produced 30,000 b/d of oil during the second quarter and reported proved and probable crude oil reserves of 269.6 million bbl. It holds stakes in Alibekmola, Kozhasai, Karakuduk, North Buzachi, and Arman oil fields in western Kazakhstan, as well as options for two Caspian Sea exploration blocks: South Zhambai and South Zaburunye.
Lukoil produced 634.4 million bbl of oil and an estimated 173.4 bcf of gas during 2004. It also reported 23.2 billion bbl of worldwide oil reserves and 39 tcf of worldwide gas reserves (OGJ, Sept. 19, 2005, p. 44).
Oil companies are looking to expand into Kazakhstan, which had 11,854 producing oil wells as of Dec. 31, 2003, and estimated production of 986,000 b/d in 2004 (OGJ, Dec. 20, 2004, p. 18).
Recently, a unit of China National Petroleum Corp. offered $4.18 billion, or $55/share, for PetroKazakhstan Inc. of Calgary (OGJ, Sept. 12, 2005, p. 29). India’s Oil & Natural Gas Corp. has said that it might make a competing offer for PetroKazakhstan.
Interfax News Agency reported Sept. 29 that Lukoil is negotiating with CNPC to buy the other half of OAO Turgai Petroleum, a joint venture of Lukoil and PetroKazakhstan.
Lukoil Deputy Chief Executive Leonid Fedun told Interfax that Lukoil might pay $700 million as it exercises its preemptive right to buy the remaining Turgai interest.
Chesapeake-CNR
Subject to regulatory approvals, the transaction is expected to close by Dec. 15. Triana was formed in 2001 by Metalmark Capital LLC as a Morgan Stanley Capital Partners portfolio company.
Columbia produces Appalachian basin gas and owns 4.1 million net acres. Through this transaction, Chesapeake expects to acquire 1.1 tcf of proved gas equivalent reserves and 1.4 tcf of probable and possible reserves. The properties primarily are in West Virginia, Kentucky, Ohio, Pennsylvania, and New York.
Chesapeake’s acquisition cost for the 1.1 tcfe of proved reserves will be $1.45/Mcf of gas equivalent. The Oklahoma City company estimates that its all-in cost of acquiring and developing the total 2.5 tcf will be $2.48/Mcf of gas equivalent, exclusive of the negative working capital and prepaid sales and hedging liabilities to be assumed.
CNR’s proved reserves are long-lived, have low production decline rates, are 99% gas, and are 70% proved developed. On the acquired properties, Chesapeake has identified 1,316 proved undeveloped locations, 6,286 probable locations, and 1,833 possible locations for an estimated drilling inventory of more than 15 years.
As of June 30 and pro forma for the acquisition, Chesapeake will own 7.1 tcf of proved gas equivalent reserves (which will be 92% gas and 100% onshore) and 6.4 tcf of unproved reserves. The company intends to spend at least $200 million/year and expects 5-10%/year production growth from the CNR assets “for the foreseeable future.”
Aubrey K. McClendon, Chesapeake’s chief executive officer, said Chesapeake’s pro forma 6.5 tcf of proved gas reserves will be the third largest in the US, trailing ExxonMobil Corp. and ConocoPhillips.
Although new for Chesapeake, the Appalachian basin has similarities with the Midcontinent, with which Chesapeake is familiar, McClendon said. He noted that most drilling in the Appalachian basin has been shallow.
EnCana sells Ecuador assets
EnCana’s asset sale, subject to Ecuador’s governmental approval, is expected to close by Dec. 31 with an effective date retroactive to July 1. Sale proceeds will be used to reduce debt, EnCana said.
This planned sale marks a final step in sharpening EnCana’s focus on nonconventional resource plays in North America. Last year, EnCana divested $3.5 billion in conventional oil and gas properties.
Regarding Ecuador, Canada’s independent has a 36.6% interest in the $1.4 billion crude oil pipeline Oleoducto de Crudos Pesados, which carries heavy crude oil from Ecuador’s Oriente basin to the coast for export to the US.
EnCana has 100% interest in the Tarapoa Block with oil production of 38,000 b/d. It also had 40% nonoperated interest in Block 15, 75% interest in Block 14, 70% interest in Block 17, and 100% interest in the Shiripuno Block.✦