The boards of Norway’s Statoil ASA and Norsk Hydro ASA have agreed to merge their oil and gas operations in a deal valued at about $30 billion, creating the world’s largest offshore operator.
In other recent company news:
- OAO Gazprom signed a protocol with Royal Dutch Shell PLC, Mitsui & Co. Ltd., and Mitsubishi Corp. to bring Gazprom into the Sakhalin Energy Investment Co. Ltd. (SEIC) as the leading shareholder. Gazprom will acquire a 50% stake plus one share in SEIC for $7.45 billion. The announcement was expected (OGJ Online, Dec. 12, 2006).
- TransCanada Corp. plans to acquire ANR Pipeline Co. and ANR Storage Co. and an additional 3.55% interest in Great Lakes Gas Transmission Ltd. Partnership from El Paso Corp.
- EXCO Resources Inc., Dallas, has agreed to acquire Anadarko Petroleum Corp.’s oil and natural gas producing properties, acreage, and other assets in Vernon and Ansley fields in Jackson Parish, La., for $1.6 billion.
Statoil-Hydro merger
Combined production of the new company-yet to be named-will be 1.9 million b/d in 2007. The combined company’s proved oil and gas reserves will be 6.3 billion boe. Hydro, meanwhile, will continue as a global aluminium company.
Hydro’s shareholders will hold 32.7% of the new firm, while Statoil’s shareholders will hold 67.3%. Hydro’s shareholders will receive 0.8622 share in the new company for each Hydro share and continue as owners of Hydro. Statoil shareholders will maintain their holdings in the new company on a one-for-one basis. The Norwegian state will hold about 62.5% in the merged entity.
The new firm will have operations in almost 40 countries. The companies’ boards propose that Eivind Reiten will become chairman of the new company, while Helge Lund is proposed as president and chief executive officer.
Following the transaction, the new company will employ 31,000 people. The companies said personnel reductions in overlapping functions are expected to be “limited and take place through internal replacement or natural turnover.”
The proposed merger is subject to approval by general meetings of Statoil and Hydro and by regulatory authorities. General meetings of both companies are slated for second-quarter 2007, and final closing is expected to be in next year’s third quarter.
The new firm will be based in Stavanger. Group functions will be in both Stavanger and Oslo, however, and the chief executive officer will operate out of both locations.
Gazprom buys into SEIC
Existing SEIC partners each will dilute their stakes by 50% interest. Shell will retain a 27.5% stake, Mitsui 12.5% interest, and Mitsubishi 10% interest. SEIC will remain operator of the Sakhalin-2 project.
Gazprom will be the majority SEIC shareholder, and Shell will continue its role as technical advisor.
The consortium’s focus is completion of Sakhalin-2 on schedule, allowing LNG to be delivered to Japan, Korea, and the North American West Coast. All existing LNG sales contracts will remain effective.
Alexey Miller, Gazprom chairman, said, “Gazprom is implementing the strategy of strengthening its positions on LNG markets. Entering Sakhalin-2 project that involves production and marketing of LNG is an important step towards this objective.”
Gazprom and existing SEIC shareholders plan an Area of Mutual Interest arrangement covering future Sakhalin oil and gas exploration and production opportunities as well as the building of Sakhalin II into a regional oil and LNG hub.
Separately, Shell, Mitsui, and Mitsubishi reached agreement with the Russian Ministry of Industry and Energy as the authorized state body for the supervision of production sharing agreements regarding Sakhalin-2.
The project had been under pressure from the Russian government, which withdrew key environmental permits from Shell and its Japanese partners. As a result of the withdrawn permits, construction on the project had effectively come to a halt (OGJ Online, Dec. 7, 2006).
Daniel Barcelo, an analyst with Banc of America Securities, said terms call for Gazprom to be considered a partner from the start of the project, which means it could be retroactively held responsible for any environmental liabilities.
“In our opinion, the environmental regulator, RosPrirodNadzor, is unlikely to find against Sakhalin Energy in its ongoing audit nor delay the project further,” Barcelo said.
He noted that the Sakhalin agreement demonstrates the Russian government is in a position “to extract concessions from the international oil companies utilizing environmental and budgetary approval as levers.”
Environmental groups withheld judgment on the transaction, said spokesmen for Sakhalin Environment Watch and Pacific Environment.
TransCanada-ANR deal
TransCanada Corp. plans to acquire ANR Pipeline Co. and ANR Storage Co. and an additional 3.55% interest in Great Lakes Gas Transmission Ltd. Partnership from El Paso Corp.
The total purchase price is $3.4 billion, subject to closing adjustments, and includes $457 million of assumed debt. The sales are part of El Paso’s efforts to reduce debt.
TransCanada Chief Executive Officer Hal Kvisle said, “With the acquisition of ANR, TransCanada’s wholly owned natural gas pipeline network will extend more than 59,000 km and offer our customers unparalleled connections.”
ANR operates 17,000 km (10,500 miles) of pipeline with a peak-day capacity of 6.8 bcfd. It transports natural gas from fields in Louisiana, Oklahoma, Texas, and the Gulf of Mexico to Wisconsin, Michigan, Illinois, Ohio, and Indiana.
It also owns and operates underground gas storage facilities in Michigan with a total capacity of 230 bcf.
After closing, TransCanada will have interests in 360 bcf of storage capacity. Pending regulatory approvals, the acquisition is expected to close in the first quarter of 2007.
Great Lakes owns and operates a 3,400 km (2,115 mile) interstate gas pipeline system with a design capacity of 2.5 bcfd.
With the acquisition of an additional 3.55% interest in Great Lakes, TransCanada will directly own 53.55% of Great Lakes and will become the operator. Great Lakes now is operated by a company jointly owned by affiliates of El Paso and TransCanada.
In a separate transaction, TC PipeLines LP will acquire 46.45% of Great Lakes from El Paso for $962 million, subject to closing adjustments, including
$212 million of assumed debt. TransCanada is the General Partner and a common unit holder (13.4% interest) of TC Pipelines LP.
EXCO to buy Anadarko assets
EXCO Resources Inc., Dallas, has agreed to acquire Anadarko Petroleum Corp.’s oil and natural gas producing properties, acreage, and other assets in Vernon and Ansley fields in Jackson Parish, La., for $1.6 billion. The transaction is expected to close in March, subject to customary approvals.
EXCO will acquire an average working interest of 91.1%, with an average 70.2% net revenue interest.
The acquisition consists primarily of proved developed producing gas properties, with current net production of about 190 MMcfd of gas equivalent from about 350 producing wells, of which 96% are operated. The properties produce from the Lower Cotton Valley formation.
Proved reserves are pegged at 466 bcf, of which 446 bcf is proved developed and 20 bcf is proved undeveloped. EXCO will continue evaluating the properties to identify additional exploitation and development opportunities.
Total acreage to be acquired is about 66,000 net acres, of which 15,000 net acres are undeveloped.
The acquisition also includes gathering systems, compression units, and treating plants.
In connection with the acquisition, hedges for a large portion of estimated production for 2007, 2008, and 2009 will be assumed by EXCO.
The acquisition will be financed with a new revolving credit facility and a bridge loan from EXCO’s banking group. EXCO expects to finalize its financing plans in January.
EXCO Chief Executive Officer Douglas H. Miller said cash flow from the Vernon and Ansley assets will be used to accelerate development of EXCO’s 1,100 drilling sites in the area and will also produce accelerated activity on its 85,000 net acres of undeveloped leaseholds.
In East Texas and North Louisiana, with the Vernon and Ansley assets, EXCO will have about 300 MMcfd of gas equivalent of current production and more than 1 tcf of proved reserves, the company said.
The company’s total current production with the Vernon and Ansley assets will approach 400 MMcfd of gas equivalent and total proved reserves will be 1.8 tcf of gas equivalent.